Privacy Layer and Compliance Platform connect through encrypted audit records and transaction authorization. The proof establishes a valid private transition; compliance determines whether that transition is permitted under the applicable policy.

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Audit records tied to the transaction

The transaction constructs encrypted audit records from the same private data used for its commitments and proof. These records support policy evaluation without publishing their plaintext to the blockchain. Audit records are associated with the application and protected within its audit-key scope.

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KYT authorization

KYT (Know Your Transaction) evaluates a prepared transaction against the checks configured for the application before settlement. An approved transaction receives a signed, time-limited authorization called a passage.

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From preparation to settlement

  1. Your application prepares a transaction using the SDK.
  2. The compliance service evaluates the transaction under the application’s configured checks, including applicable restrictions and address screening.
  3. If approved, the transaction receives a passage. If rejected, it cannot proceed through settlement.
  4. At settlement, the smart contracts require a valid passage alongside the transaction proof. The passage expires and can be used only once.
The pool also verifies the transaction proof and state transition. An approved KYT response alone does not prove that settlement will succeed.

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Authorization boundaries

A passage is transaction authorization, not ownership of notes and not a permanent approval of an account. The ability to withhold authorization can prevent a payment from proceeding, but does not grant the authorizer the ability to spend or redirect its inputs. Compliance availability is therefore part of transaction availability. A valid proof cannot compel an unavailable or refusing policy service to approve settlement.

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Controlled disclosure

Later investigation or audit is a separate workflow. An approved request defines the records, purpose, recipient, and fields that may be released. In the paper’s model, selective disclosure is policy-mediated filtering after authorized decryption within the protected boundary. It is not cryptographic field-level selective disclosure. The recipient learns the released information and may retain it; disclosure does not grant ongoing access or reveal decoding keys.

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Where the boundary lies

For custody, protected execution, rotation, and retention, continue in Compliance Platform: For transaction-screening integration, see the KYT API.