Compliance Bridge: Trust for Institutional DeFi

Trust, not tech, is the barrier. Fairway’s compliance bridge uses KYC vaults, ZK proofs, and identity tokens to unlock safe institutional DeFi.

Every DeFi founder knows the appetite is there. Pension funds, insurers, and sovereign wealth funds want exposure to yield, tokenized assets, and new liquidity venues. But one high-profile failure could close the door for the entire sector.

The real obstacle isn’t technology. It’s trust.

The Risks

• AML gaps: Funds moving through pools without clarity on source of funds.

• Sanctions evasion: Blacklisted wallets sneaking in, sanctioned countries or individuals participating

• Auditability: Regulators demand clear trails, but DeFi often provides opacity.

Why This Matters

Institutions aren’t waiting for “perfect” regulation—they’re waiting for credible guardrails. Without them:

• Banks can’t custody assets.

• Funds can’t allocate capital.

• Regulators can shut doors overnight.

The Bridge: Verify → Prove → Access

flowchart LR
    A[Institution defines KYC/AML policy] --> B[Users complete KYC with provider]
    B --> C[Vault stores commitments + ZK proof]
    C --> D[Identity Token issued]
    D --> E[dApp checks eligibility]

• Define → Institutions define rules and users complete KYC with trusted providers.

• Prove → Fairway vaults turn KYC data into ZK-proofs (no raw PII on-chain).

• Access → Identity tokens unlock compliance-gated DeFi participation.

Tools

• KYC Vaults (off-chain storage + ZK commitments).

• Identity Proofs (Merkle trees / ERC-3643 style).

• Policy Engines (programmable eligibility checks).

Takeaway Framework: The 3-Steps for users

1

Verify once

Users go through traditional KYC process

2

Prove without revealing

They gain a proof that can be connected to multiple wallets and used to prove eligibility

3

Access everywhere

Same proofs will be accepted on any DeFI