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Real-world assets (RWA) are accelerating their entry into the DeFi field, bringing liquidity changes to traditional finance.But in practice, DeFi’s anonymity conflicts with traditional financial strong regulation (especially KYC/AML).Achieve compliance is not a simple port, but requires the integration of innovative architecture and technology.
The integration of RWA and DeFi is not a simple “access”, but it gives birth to a new type of financial infrastructure.A successful KYC/AML compliance solution must be a hybrid architecture: off-chain identity authentication and legal entities are the cornerstones, and efficient, privacy-friendly verification and execution are achieved through ZKP, DID, and programmable compliance on the chain.Regulators need to embrace innovation and clarify adaptive rules under the principle of “same risks, same supervision”.Technology developers need to regard compliance as their core design goal, rather than post-patch.
1. Decoupling identity and transaction setting hierarchical architecture
It is laid out from two levels: blockchain identity and contract access.
Off-Chain/On-Chain Hybrid Identity.Users pass Circle (USDC issuer), Fractal ID, Parallel Markets, etc.Off-chain professionalKYCProviderComplete strict KYC/AML verification.Biometrics, document verification, and risk database screening are all completed under the security chain environment.At the same time, basedVerified credentials on the chain,Generate Zero Knowledge Proof of (ZKP) credentials (such as Polygon ID) or Soul-Binding Tokens (SBT) to prove that the user has “passed KYC” or “non-sanctions list” without exposing specific identity information.The credentials are bound to the user’s wallet address.
Gated Access / Permissioned Pools.Specific RWA fund pool settings for DeFi protocols (such as Centrifuge, Goldfinch)Credential-based access control accessrule.Users need to provide valid vouchers to participate (deposit, borrow, and trade specific RWA assets).When the KYC status expires or is revoked, the certificate will automatically expire, triggering presets within the protocolDynamic credential managementRules (such as prohibiting new investments and starting the exit process).
2. Real-time transaction monitoring and automated AML screening challenges
In terms of dynamic supervision, multiple measures have been taken through off-chain data integration, on-chain transaction behavior monitoring and suspicious activity reporting.
On-Chain Transaction Monitoring.For example, you can analyze wallet historical transactions and associated addresses (such as interacting with dark web and coin mixer) through tools such as Chainalysis and Elliptic to generateaddressRisk score.In addition, buildException mode detectionMonitor large amounts, frequent, source/destination abnormal transactions (such as sudden transfer of large amounts of funds to invest immediately in RWA).
Off-chain AML database integration.Integrated such as ComplyAdvantage, LexisNexisReal-time screeningAPI.The key challenge is to associate the wallet address with the off-chain identity (relying on the aforementioned credential system) so that the screening can be legally effective.But on the other hand, how can on-chain smart contracts securely and trustworthyly obtain off-chain AML list updates?Specific solutions need to be developed for decentralized oracle networks such as Chainlink.
On-chain-off-chain linkage of suspicious activity reports (SAR).If a protocol or monitoring service detects high-risk transactions, the encrypted transaction data + associated identity information must be reported to the regulator/compliance team through the compliance interface.The key challenge is that the reporting process, responsible parties, and data formats need to be standardized.
3. Clarify the responsible parties and the basic mechanism for dispute resolution
Mainly resolve responsibility and dispute resolution mechanism.
Clarify the Gatekeeper Problem.againstSpecial Purpose Vehicle (SPV) / Legal Entity,The RWA promoter (such as real estate companies, bond issuers) or the core developer of the agreement establishes a regulated entity (such as a Centrifuge registered entity) to perform KYC/AML as the legal person responsible.againstPermissioned DeFi protocol (Permissioned DeFi),The agreement itself needs to be designed to require permission to join (both nodes and liquidity providers require KYC), such as some enterprise-level blockchain solutions (such as Fnality).In addition, we also need helpThird-party compliance service providers, such asThe agreement entrusts licensed institutions (such as trust companies, payment institutions) to handle user due diligence and transaction monitoring.
Jurisdiction and applicability of the law.Real estate RWA is mainly subject to its physical location, i.e.Asset location lawLegal jurisdiction.Some scenarios are suitableUser location law,Comply with financial regulations on the user’s place of residence/nationality (such as FATCA, EU AMLD).At the same time, requestProtocol transparent designClarify the applicable laws, regulatory agencies and user rights to the announcement.
4. Combining technology and law to solve the balance between privacy and efficiency
Converge the use of privacy computing technology, decentralized identity technology and approved regulatory technology with smart contracts.
In-depth application of Zero Knowledge Proof (ZKP).KYCThe certificate is availableProve that the user information is valid and has not been blacklisted, and the specific content will not be disclosed.Can also be doneAML screening,The user runs the screening software locally and generates ZKP proof that “my counterparty is not on the latest blacklist”, without exposing the opponent’s address to the protocol/counterparty.It can also be generatedCertificate of transaction compliance,Complex transactions can generate ZKPs to prove that they comply with all preset rules (such as single investor limits).
Decentralized Identity (DID) and verifiable credentials (VCs).Users have complete control over identity data (stored in personal digital wallets) and selectively disclose specific information to specific parties only when needed (such as only proof of “annual income of $100,000” to the RWA pool).Improve interoperability and reduce duplicate KYC.
The combination of regulatory technology (RegTech) and smart contracts.Programmable compliance, ifAML rules, investment limits, lock-up periods, etc. are directly encoded into the smart contract and automatically executed.Provides “read-only” APIs for regulatorsRegulatory SandboxInterfaces, monitor overall risks without having to view privacy details for each transaction.
5. Move forward through continuous challenges and solutions
The eternal tension of privacy and compliance, i.e.How to maximize the protection of users’ financial privacy while meeting the regulatory real-name requirements? ZKP/DID is the direction, but large-scale applications require more mature practices.
Coordination across jurisdictions is also a major challenge.The world lacks a unified crypto asset/DeFi regulatory framework, and the RWA protocol faces fragmented compliance requirements.
The definition of responsibility is vague.Smart contract vulnerabilities lead to violations. How to divide the responsibilities of developers, nodes, users, and SPVs?The law needs to be followed up urgently.Agreement can be made in advance during the design of the pattern.
Oracle trust and security.The off-chain key data (AML list, asset price) must be highly secure and reliable, otherwise it will become a single point of failure or target of attack.
Sanctions enforcement difficulties.How to effectively freeze assets at specific sanctioned addresses on the underlying blockchain without permission?It is extremely difficult to implement technology and requires the control of front-end/investment channels, combining on-chain and off-chain.
Despite the huge challenges, RWA’s compliance path in DeFi is being explored in projects such as Centrifuge, MakerDAO (RWA collateral), and Ondo Finance (tokenized government bonds).This is not only about legitimacy, but also the key key for RWA to unlock trillion-dollar liquidity – compliance is the only way for DeFi to go mainstream, not an obstacle.
