Regulatory Compliance

Untrace Protocol adopts a compliance‑aware architecture that balances user privacy with lawful obligations. This section provides prescriptive controls, technical patterns, and governance processes to enable compliant operations while minimizing privacy exposure.

Core Compliance Principles

• Privacy-by-Design: Default system behaviors minimize collection of personal data, favoring pseudonymous identifiers and selective disclosure mechanisms.

• Proportionality: Compliance interventions (e.g., view keys, attestations) are limited in scope, auditable, and require DAO consent before activation.

• Transparency: Maintain published policies and legal opinions describing how Untrace handles regulatory requests, sanctions screening, and jurisdictional obligations.

Technical Controls for Regulatory Alignment

• Compliance Gateway: An opt‑in adapter for enterprise on‑ramps and off‑ramps that emits zk‑attestations or selective disclosure proofs to authorized auditors without revealing the full transaction graph.

• Selective Disclosure & View Keys: Mechanisms enabling users to generate time‑bounded view keys that reveal only specific transactional subsets to authorized parties.

• Sanctions Screening Interface: Off‑chain relayer API for OFAC/EU sanctions list checks integrated at fiat rails and validator onboarding stages.

Operational Policies

• KYC/AML Integrations: Reference patterns for integrating certified KYC providers for enterprise customers; retail path remains permissionless and non‑custodial.

• Lawful Request Handling: Standard operating procedure requiring: (1) validated legal instrument, (2) DAO approval for exceptional disclosures, and (3) minimal technical disclosure via zk‑attestation or redacted view key.

• Data Retention & Minimization: Define retention windows for telemetry and logs, encryption‑at‑rest, and RBAC for audit access.

Compliance Documentation & Reporting

• Publish a Compliance Whitepaper, periodic transparency reports, and redacted audit logs for on‑chain actions involving compliance gateways. Legal opinions and policy updates are versioned and stored in the governance portal.