Compliance as Code

What we're enforcing

The system enforces three core requirements, and each one keeps the lifecycle honest. Only verified investors can hold or receive assets. We link investor identities to one or more wallets and maintain a whitelisted registry. Rules execute before transfers: jurisdictional limits, holding periods, geo-fences, and concentration caps are checked pre-transfer and blocked on-chain if violated. Every decision gets audited: allow/deny outcomes, actors, timestamps, and rule references are exportable for regulators and auditors.

Principles and invariants

Four principles govern the DALP's compliance plane:

1. Ex-ante control: approvals happen before state change, not after.
2. Single source of compliance truth: investor identity, claims, and rules are canonical and reusable across offerings.
3. Explainability: every allow/deny returns machine-readable reason codes plus human evidence for audit.
4. Regulatory continuity: rule libraries track EU/GCC/SG/US frameworks and drive filings or alerts automatically.

The SMART compliance module system

The SMART Protocol implements pluggable compliance modules so policy stays programmable:

• Core modules cover geography (country whitelist/blacklist), investor concentration (max ownership), and temporal controls (lock-ups, vesting windows).
• Advanced modules manage supply limits, approved venues, and bespoke rules for project-specific regulation.
• Module lifecycle is governed: modules register in a central registry, deploy through managed factories, activate per token with administrator consent, and track updates or deactivation with governance approval.
• Performance footprint stays predictable: typical modules add 3-12k gas per transfer, so risk teams can model cost and throughput impact alongside policy decisions.

This architecture lets compliance officers mix-and-match modules per instrument while guaranteeing a single on-chain enforcement point, so policy flexibility never trades off against control.

Identity integration and evidence trail

OnchainID integration ensures identity and claim data remain reusable:

• OnchainID contracts hold decentralized identity data, while trusted issuers populate KYC/AML/accreditation claims.
• Identity registry + claim validator inside the DALP verify claim freshness, revocation status, and expiration before execution.
• Compliance engine composes identity-derived rules with module logic, emitting allow/deny decisions, diagnostics, and immutable audit logs.
• Evidence bundles package the identity snapshot, module verdicts, and transaction metadata so regulators or counterparties can verify compliance independently.

Jurisdictional playbook

The same rule engine can express region-specific obligations:

• MiCA / EU: country restriction + investor caps + time-based modules encode passporting, lock-ups, and reporting thresholds; audit bundles satisfy ESMA requests without manual compilation.
• United States: accreditation claims combined with venue restrictions keep Reg D/Reg S flows separate while documenting exemption reliance.
• Singapore & GCC: claim topics model MAS fit-and-proper checks and shariah eligibility; modules gate transfers geographically and by asset class.

Because compliance logic is code, policy updates are versioned, peer-reviewed, and deployed through the same pipelines that manage contracts and APIs, keeping regulators informed without slowing delivery.

What to carry into the build

1. Compliance executes ex-ante on the same control plane as the asset: no transfers bypass the policy brain.
2. Identity, claims, and rules share a single source of truth so approvals are reusable across issuances and venues.
3. Every decision emits evidence: reason codes, timestamps, accountable actors, and rule contexts, so regulators verify rather than trust.
4. Module governance is formal: registration, activation, updates, and deactivation travel through controlled workflows with audit logs intact.

Part II translates these mechanics into contract architecture, policy expression, onboarding UX, and operational tooling.