A group of central banks, international institutions, and financial firms contributed to a Global Layer One (GL1) white paper on programmable compliance for tokenized financial assets. Contributors include Banque de France, the International Monetary Fund (IMF), Kinexys by J.P. Morgan, the Monetary Authority of Singapore (MAS), and Standard Chartered. The paper examines how compliance controls can be embedded into regulated digital-asset transactions to balance regulatory oversight with commercial confidentiality and client privacy.
Central Banks and Financial Institutions Contribute to GL1 White Paper
The GL1 white paper examines how compliance controls can be embedded into regulated digital-asset transactions. Additional input came from Bermuda, a privacy protocol for regulated digital assets, as well as the BIS Innovation Hub, the innovation arm of the Bank for International Settlements (BIS); Chainlink Labs, a blockchain infrastructure provider; GLEIF, the Global Legal Entity Identifier Foundation; and other industry participants.
According to an announcement by Bermuda, full public-chain transparency is often incompatible with commercial confidentiality and client privacy for regulated institutions. The company stated that every transaction can expose counterparties, amounts, and asset types, while full opacity can leave issuers and regulators with blunt enforcement tools. Bermuda noted that when action is required, the only available lever may be to freeze an entire pool, affecting compliant funds and legitimate users alongside illicit activity.
Market participants must balance regulatory oversight with commercial confidentiality, especially where transaction data may be visible across blockchain networks. The GL1 paper outlines an architecture intended to support compliance controls while preserving privacy in regulated digital-asset activity.
Bermuda Protocol Provides Privacy-Preserving Compliance Tools
The GL1 paper includes Bermuda as a privacy solution for enforcing asset- and transaction-level policies in private digital-asset transactions. According to the paper, issuers can apply compliance rules before transfers, swaps, or settlements occur, while maintaining confidentiality through privacy-preserving technologies.
Bermuda's contribution to the GL1 paper focuses on privacy-preserving compliance tools that allow asset- and transaction-level policies to be enforced in private digital-asset activity. Jan Philipp Fritsche, co-founder of Bermuda and former European Central Bank official, stated that enforcement needs precision. Fritsche said recent incidents have shown what happens when precision is missing: issuers can be forced into blunt measures that risk freezing an entire protocol and the compliant users inside it.
Bermuda said its protocol uses client-side zero-knowledge proofs and operates on EVM-compatible networks without requiring contract rewrites.
Framework Explores Zero-Knowledge Proofs for Regulatory Requirements
The framework explores how tools such as zero-knowledge proofs can support regulatory requirements without exposing sensitive transaction data. Contributors argue that this approach can help regulated institutions balance commercial confidentiality with enforceability in tokenized asset markets.
In an interview with Bitcoin.com News, Fritsche said the digital asset industry needs compliance tools that can distinguish high-risk activity from legitimate transactions. He argued that privacy-preserving technologies and compliance enforcement can work together, allowing issuers to apply targeted restrictions without affecting compliant participants.
FAQ
What did the GL1 white paper on programmable compliance cover?
The GL1 white paper examines how compliance controls can be embedded into regulated digital-asset transactions. It outlines an architecture intended to support compliance controls while preserving privacy in regulated digital-asset activity.
Which institutions contributed to the GL1 white paper?
Contributors include Banque de France, the International Monetary Fund (IMF), Kinexys by J.P. Morgan, the Monetary Authority of Singapore (MAS), Standard Chartered, Bermuda, the BIS Innovation Hub, Chainlink Labs, GLEIF, and other industry participants.
How does Bermuda's protocol support compliance and privacy?
Bermuda's protocol uses client-side zero-knowledge proofs and operates on EVM-compatible networks without requiring contract rewrites. It allows issuers to apply compliance rules before transfers, swaps, or settlements occur, while maintaining confidentiality through privacy-preserving technologies.
