Skip to main content

Compliance Overview

Privacy and compliance are not at odds — Bermuda is built on the principle that both can coexist. The protocol includes a modular compliance framework that allows operators, regulators, and institutions to enforce rules without compromising user privacy.

Modular Compliance Layer​

Bermuda's compliance system is designed as a pluggable module. Integrators can configure compliance policies to match their regulatory requirements, jurisdiction, and risk appetite — without modifying the core protocol.

This means different deployments can operate under different compliance regimes while sharing the same privacy infrastructure.

How It Works​

Bermuda applies compliance across three connected stages, each serving a different role in the lifecycle of shielded funds:

  1. Deposit authorization — Before public assets enter the pool, the depositing address is screened and the deposit is authorized through Predicate-backed attestations together with deposit-time compliance data. At this stage, the deposit is also associated with a randomly assigned deposit_id, which becomes the lineage handle used later in the compliance flow.
  2. Retroactive flagging — After deposit, the compliance engine can re-screen depositor addresses, map newly flagged addresses to their associated deposit_id values, and update the blacklist root used by withdrawals.
  3. Withdrawal enforcement — At exit, Bermuda checks the withdrawal against the current blacklist state. Compliant funds retain the private withdrawal path through a Proof of Innocence (POI), while blacklisted lineage is forced onto the public path.

This is what makes Bermuda retroactively compliant. A deposit may be admitted under one compliance state, while withdrawal is evaluated under a later one. If a depositor address is later flagged as blacklisted, the affected funds can be handled without rolling back the pool or forcing unrelated users to reveal their activity.

The Three Pillars​

Bermuda's compliance framework operates across three stages:

  1. Pre-Shield Check — Screen and authorize deposits before they enter shielded state.
  2. Retroactive Flagging — Re-screen deposited addresses and update blacklist state when previously accepted depositors are later flagged.
  3. Withdrawal Checks — Prove at withdrawal that funds exclude blacklisted deposit_id lineage, preserving privacy for compliant funds.

Each stage is covered in detail on its dedicated page.

For Integrators​

If you are building on Bermuda and need to meet regulatory requirements, the compliance module gives you the tools to do so — without forcing your users to give up privacy. The framework supports KYC/AML workflows, jurisdiction-specific rules, and custom policies out of the box.