Technology
Compliance embedded at
the protocol layer
PazaLabs' hybrid CeDeFi architecture separates compliance-sensitive operations onto a permissioned chain and liquidity operations onto the public chain — connected by a cross-chain audit bridge so every on-chain transaction has a verifiable compliance trail.
Hybrid CeDeFi Model
Traditional DeFi platforms force a trade-off: open, permissionless chains are incompatible with KYC/AML requirements; private chains sacrifice liquidity. PazaLabs resolves this with a two-chain architecture — a permissioned chain for compliance-sensitive operations, and a public chain for liquidity and trading — bridged in real time.
Every asset that reaches the public chain has already passed through the full compliance stack: identity verification, document validation, AML screening, and regulatory classification. The bridge records each compliance event immutably, giving regulators a complete audit trail without exposing private data.
Permissioned Chain
Runs compliance, KYC/AML, document validation, and regulated token issuance in a controlled environment with full auditability.
Public Chain
Hosts secondary liquidity (Paza Pools), trading, and PAZA governance. Open to verified participants via permissioned token transfer rules.
Cross-Chain Bridge
Each compliance event on the permissioned chain produces a proof that anchors to the public chain — so every token on the public chain has a verifiable compliance history.
Audit Trail
All compliance decisions, document hashes, and approval events are recorded immutably and accessible to regulators without exposing raw sensitive data.
CeDeFi Architecture Overview
GenAI-RAG Engine — Spans Both Layers
Document validation · Automated compliance checks · Real-time risk monitoring · Anomaly detection
AI-powered due diligence at the speed of compliance
Manual due diligence on complex structured assets takes weeks and introduces human error. PazaLabs' Retrieval-Augmented Generation (RAG) engine automates document ingestion, validation, and compliance classification — completing in hours what previously took months.
Document Ingestion
Loan tapes, title deeds, appraisals, insurance docs, and legal agreements are ingested in bulk. The engine normalises formats across PDF, XML, structured data, and legacy formats.
Semantic Validation
Retrieval-augmented search cross-checks every document against a compliance knowledge base — flagging missing fields, inconsistent terms, and regulatory red flags in real time.
Counterparty Screening
Automated KYC and AML screening against global sanctions lists, PEP databases, and adverse media — with continuous re-screening throughout the asset lifecycle.
Risk Scoring
Each asset and pool receives a structured risk score across credit, legal, operational, and market dimensions — updated continuously as new data arrives.
Compliance Classification
Assets are automatically classified against SEC Reg D, ESMA, MiCA, and other applicable frameworks — with a full rationale logged for each classification decision.
Performance Monitoring
Once live, the engine monitors pool performance data, flags covenant breaches, detects deterioration signals early, and notifies relevant parties automatically.
ERC-3643: Permissioned Security Tokens
ERC-3643 (T-REX) is the institutional standard for compliant security tokens on EVM chains. It enforces transfer restrictions at the smart contract level — so only verified, whitelisted addresses can hold or transact the token, and compliance rules execute automatically on every transfer without manual review.
Identity Registry
Each token holder's verified identity is stored in an on-chain registry. The registry is controlled by a trusted identity issuer (the compliance provider) and is used to validate every transfer.
Claim Topics
Investors must hold valid claims (KYC verified, accredited investor, jurisdictional approval) to hold the token. Claims expire and must be renewed, keeping the compliance status current.
Transfer Rules
Smart contract transfer rules are configurable: restrict by jurisdiction, investor category, lock-up period, or holding limits. Rules execute atomically — no transfer completes without passing all rules.
Forced Transfers & Recovery
Regulators or issuers with appropriate authority can force-transfer or freeze tokens — critical for legal compliance, sanctions enforcement, or error recovery.
ERC-3643 Transfer Flow
Sender initiates transfer
Token holder calls transfer() with recipient address
Identity check
Contract queries Identity Registry: is recipient verified?
Claim validation
Are all required claims valid and unexpired?
Transfer rules check
Do jurisdiction, category, and lock-up rules pass?
Transfer executes
All checks pass → transfer settles on-chain
Event logged
Transfer event emitted; compliance audit trail updated
Enterprise-grade security architecture
Institutional assets demand institutional security. Every component of the PazaLabs stack is designed with defense-in-depth — multi-sig controls, independent audits, and operational security that meets the bar of regulated financial infrastructure.
Multi-Sig Governance
All privileged operations — token minting, forced transfers, admin upgrades — require multiple independent signatories, eliminating single points of failure.
Smart Contract Audits
All protocol contracts undergo independent third-party security audits before mainnet deployment, with findings published and remediations verified.
Permissioned Access
Role-based access control across all admin functions. Compliance, operations, and legal roles are separated with minimal privilege and full audit logging.
Regulatory Alignment
Architecture reviewed for alignment with SEC, ESMA, MAS, and CFTC frameworks. Legal opinions obtained for each jurisdiction of operation.
Ready to go deeper?
Download the whitepaper for a full technical specification, or book a call with our engineering team.