Nobody has any idea what this will be used for.
In the text dump of DSII, there is a file called regulation.txt which only contents is
The letters are worn beyond recognition
leading many people to believe that this will be used in future updates, being that it is a variable pulled from a specific text file unlike any other place in the game.
That being said, on The Far Fire there is section in the information section that contains all of the current patch notes. This section is named 'Regulation' as well, so there may be some type of connection there.
It does seem odd that the patch notes section would be called 'Regulation', as I have never seen them referred to as such although it may just be a translation problem as the souls series is in fact a translated game from a Japanese developer.