Chainlink, the standard for onchain finance, has officially announced the launch of Chainlink Automated Compliance Engine (ACE), which happens to be a unified and modular standard, geared towards solving all onchain compliance problems and bringing institutional capital onchain.Â
According to certain reports, the stated compliance engine arrives on the scene bearing an ability to leverage Chainlink Runtime Environment (CRE), while simultaneously supporting both traditional and decentralized finance. More on that would reveal how, thanks to the given mechanism, Chainlink’s all-new seamlessly facilitates the creation of compliance-focused digital assets and services across public and private blockchain.
Not just that, it also unlocks more than $100 trillion as institutional capital to be infused into the onchain economy.
To understand the significance of such a development, we must take into account how current compliance processes in traditional finance are largely fragmented, siloed, and costly, triggering billions of dollars in onboarding costs for institutional investors. A mechanism of this sort also forces institutions to manage complex identity verification, risk monitoring, and reporting processes, something which unsurprisingly increases costs, reduces margins, and lengthens onboarding times.
Now, there have been attempts to address the given problem, but these attempts have mostly relied upon bespoke integrations, manual procedures, or static allow lists, thus falling short of the scale, flexibility, and privacy needed for regulated blockchain-based finance.Â
Against that, Chainlink ACE brings to the fore a modular, privacy-preserving framework which integrates existing identity systems with onchain infrastructure, and at the same time, supports onchain and offchain policy enforcement. The idea here is to help regulated financial institutions deploy their assets on public and permissionless networks, as well as support their compliance obligations.
Hence, Institutions across the board can leverage Chainlink ACE to enforce policy rules directly within smart contracts, verify credentials like KYC/AML without exposing personal data, and coordinate identity attestations across blockchains and jurisdictions. On top of that, they can also access a compliance logic which is reusable, upgradeable, and enforceable across any combination of token standards, execution environments, or legal jurisdictions. This allows users to significantly shrink their costs and operational complexity.
“Our goal here is to make faster, cheaper, and more accurate compliance a key defining benefit of making or owning digital assets, so that if you make a digital asset and use the Chainlink standard for compliance in that digital asset, it will be better, cheaper, and faster than its traditional alternative. Chainlink ACE is the compliance and identity standard the tokenized asset economy has been waiting for, with today’s launch providing a final critical building block for over $100 trillion in institutional capital to move onchain. Chainlink ACE is unlocking critical industry requirements to move to its final stage of mass adoption,” said Sergey Nazarov, Co-Founder of Chainlink
Taking an even deeper view of the proposition, we begin by expanding upon its Cross-Chain Identity (CCID) Framework, which would be a reusable identity framework for representing investor identities, attestations, and credentials across multiple blockchains. The stated element is also capable of storing cryptographic proofs of verified credentials, such as KYC, AML, accredited investor status, and more.
Next up, we must dig into the ACE’s Cross-Chain Token (CCT) Compliance Extension, which is understood to be a lightweight interface that enables any token to support compliance functionality by integrating with Chainlink services.
Another detail worth a mention is rooted in the availability of a policy manager. This one is essentially a customizable rules engine focused on empowering users to define, manage, and enforce compliance policies directly within smart contracts, using onchain or offchain execution.
Joining that would be an identity manager, who delivers at your disposal a middleware that links real-world identity sources to various onchain formats, and it does so to support the registration, distribution, synchronization, and lifecycle management of identity credentials across networks without storing NPI/PII onchain.
Rounding up highlights would be a monitoring and reporting manager, making up a dedicated service for observing infrastructure, smart contracts, and third-party integrations for non-compliance, anomalies, and system failures. By doing so, the feature is able to achieve real-time alerts, proactive risk mitigation, and strengthened operational resilience.
In case that wasn’t enough, the solution also enables institutions to obtain reports for supporting internal and regulatory compliance.
