Chainlink Labs Proposes On-chain Compliance Framework to U.S. Treasury

Quick Breakdown 

• Chainlink Labs responds to U.S. Treasury’s call for input on detecting illicit digital asset activity.
• Proposal outlines how oracles and programmable rules can enhance on-chain compliance and transparency.
• Focus areas include digital identity, rules-based compliance, and proof-of-reserve verification.

Chainlink Labs has formally submitted its response to the U.S. Treasury’s Request for Comment on “Innovative Methods to Detect Illicit Activity Involving Digital Assets ,” highlighting how blockchain-based technologies can strengthen financial oversight while preserving user privacy. The proposal aligns with the objectives of the GENIUS Act, which seeks to modernize digital asset regulation through innovation-driven solutions.

Chainlink Labs has submitted a formal response to the @USTreasury ’s Request for Comment on “Innovative Methods to Detect Illicit Activity Involving Digital Assets,” as part of implementing the GENIUS Act.

With identity oracles and programmable rules engines, onchain compliance…

— Chainlink (@chainlink) October 22, 2025

Advancing On-chain compliance with cryptographic infrastructure

In its submission, Chainlink Labs argued that decentralized identity, programmable compliance tools, and proof-of-reserve systems can create a more transparent and auditable digital finance ecosystem. The firm outlined how identity oracles and rules engines enable automated, rules-based compliance processes that minimize manual intervention and reduce human error.

Central to the proposal is the concept of portable, privacy-preserving digital identity, which leverages blockchain-based verifiable credentials. Chainlink suggested that these tools can streamline KYC and AML processes while avoiding repetitive data collection and protecting user privacy through selective disclosure mechanisms.

The submission also called for regulators to clarify that administrative control of a smart contract does not equate to a customer relationship under the Bank Secrecy Act. This clarification, the company noted, would prevent undue regulatory burdens on developers while keeping compliance responsibility with entities that directly engage customers.

Enhancing transparency through On-chain verification

Chainlink Labs emphasized that its Automated Compliance Engine (ACE) can apply programmable, risk-based policies before transaction settlement, improving oversight and auditability for financial institutions.

Additionally, the company’s Proof of Reserve and Secure Mint frameworks were presented as tools to enhance reserve transparency by connecting off-chain attestations to on-chain verification. These technologies, Chainlink stated, enable continuous monitoring of tokenized assets to ensure they remain fully backed, bolstering trust across the digital asset market.

Meanwhile, 0G, a modular AI-focused Layer 1 blockchain, has adopted Chainlink CCIP and Data Streams as its canonical cross-chain infrastructure, enabling secure token transfers, low-latency market data, and real-time AI-powered decentralized applications.

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