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 can be more effective, auditable, and scalable than existing, manual checks. The submission highlights four areas where cryptographic technologies will materially improve outcomes, collectively strengthening transparency and efficiency while aligning with the GENIUS Act’s goal to modernize digital asset oversight through innovation: 1. Portable, Privacy-Preserving Digital Identity Blockchain-based verifiable credentials, facilitated by an identity-oracle model, streamline KYC/AML processes, reduce redundant data collection, and preserve user privacy through selective disclosure. 2. Clarifying Administrative Control vs. Customer Relationships Regulators should make clear that simply having administrative control of a smart contract does not establish a customer relationship or trigger “financial institution” status under the Bank Secrecy Act. This distinction protects responsible software development while ensuring compliance duties remain with parties that actually serve customers. 3. Rules-Based Onchain Compliance Programmable rules engines, such as Chainlink’s Automated Compliance Engine (ACE), enforce risk-based policies before settlement, reduce human error, and improve auditability for financial institutions. 4. Cryptographically Assured Reserve Transparency Chainlink Proof of Reserve and Secure Mint gating frameworks connect offchain attestations to onchain execution, offering continuous, verifiable assurance that tokenized assets are fully backed. Read the full submission: https://blog.chain.link/wp-content/uploads/2025/10/Chainlink-Labs-Submission-Treasury-RFC-on-Illicit-Finance.pdf(Chainlink)