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Regulation & Compliance
Solving the privacy/compliance tradeoff.
Our approach to complying with regulation is based on 3 pillars:
- 1.Complying with AML laws using ZK proofs
- 2.Eliminating authority over funds with self-custody
- 3.Reducing control over the protocol through decentralization
This approach is based on our research consisting of interviews with industry and legal experts, analysis of existing protocols and ongoing regulatory changes. Read the full report.
There is an inherent tradeoff between privacy and compliance because compliance requires data to be verified by a second party. Our solution to breaking this tradeoff is using ZK proofs to let the first party themselves prove compliance without revealing underlying data.
Practically, this means users of Polybase can generate ZK proofs in their browser or app that cryptographically prove their wallet does not contain funds originating from a known set of "bad wallets". They can do this without revealing any specific transaction details.
This approach is configurable to different jurisdictions, regulators and use cases. For example, regulators could even publish their own zk circuts that users could prove compliance against.
In Polybase, users have full control over their funds through their wallet. No other party can move their funds unless they obtain the private key of the wallet. This self-custody of funds eliminates the need for money transmission licenses. Polybase Labs is not transmitting or transferring any funds, only providing software for a peer-to-peer communications network over which entities transmit money to others by themselves.
Polybase Labs provides software for entities to run nodes on a peer-to-peer network. These nodes facilitate a communication protocol allowing entities to exchange messages to each other. These messages help entities update their own ledgers. The protocol only validates that messages are following a set of rules defined by the protocol.
Last modified 21h ago