Chainlink Pushes Blockchain-Based Compliance Plan to U.S. Treasury

Chainlink’s identity oracle could simplify KYC while protecting privacy by letting users verify once across multiple platforms.

Chainlink urges clear rules to protect developers from being treated like financial institutions when they don’t handle customer funds.

Automated compliance and Proof of Reserve tools offer real-time enforcement and transparency, cutting human error and boosting trust.

Chainlink Labs has taken a bold step in shaping future crypto regulations. The company submitted a detailed proposal to the U.S. Department of the Treasury in response to its request for comment under the GENIUS Act

As per the X post, Chainlink Labs wants to use blockchain and smart tech to spot illegal crypto activity faster and more accurately. Their goal is to help the government improve how it watches over digital assets by offering tools that are more private, easier to scale, and easier to check than the old, manual systems banks still use.

New Model for Compliance and Privacy

Chainlink’s submission breaks down its proposal into four core areas: digital identity, smart contract administration, automated rules engines, and reserve transparency. Each of these components focuses on reducing compliance risks while improving transparency.

The digital identity model introduces an “identity oracle” that enables reusable, blockchain-based credentials. With this system, people would only need to verify their identity once and then use that same proof anywhere

That means they wouldn’t have to keep handing over personal info every time they sign up for a new service. This could make background checks like KYC and AML faster, lower the chances of data leaks, and save companies money on setup costs.

Moreover, Chainlink urged the Treasury to update the Bank Secrecy Act’s reliance provisions. The firm recommended that regulated financial institutions recognize verified credentials issued by other trusted blockchain entities. Additionally, Chainlink encouraged exploration of zero-knowledge proofs to verify user eligibility without revealing personal information.

Smart Contracts, Rules Engines, and Proof of Reserve

Chainlink also called for a clear line between administrative access and financial service obligations. “Holding admin control of a smart contract does not equal serving customers,” the firm stated. This distinction would shield developers from unnecessary regulatory pressure when they don’t handle customer funds.

Another key piece of Chainlink’s plan involves automated compliance enforcement. Its Automated Compliance Engine (ACE) applies rules—like sanctions screening or AML checks—before transactions settle. This reduces human error and enhances audit trails for regulators.

Finally, Chainlink presented its Proof of Reserve and Secure Mint systems. These cryptographic tools link real-world reserves to blockchain assets. If collateral drops below thresholds, minting stops automatically—preventing undercollateralized token issuance in real time.

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