Compliance

EB provides privacy-preserving compliance for regulated stablecoins. The key principle: no single party can unilaterally decrypt transaction data—not even the protocol developers.

The EB Approach

Traditional	EB
Trusted escrow holds decryption keys	No single party has keys
Central authority can surveil	m-of-n guardians required
"Trust us" privacy	Cryptographic guarantees
All-or-nothing access	Per-transaction decryption

What's Visible by Default

Layer 2 (Encrypted Balances)

Alice sends to Bob

Visible:
  ✓ Sender: Alice's address
  ✓ Recipient: Bob's address
  ✓ Token: ebUSD
  ✓ Time

Hidden:
  ✗ Amount (ElGamal encrypted)

For KYC/AML: Addresses are visible. You can see who transacted with whom.

For amounts: Requires UKRC threshold decryption (see below).

Layer 3 (Anonymous Staking)

Alice stakes → [commitment pool] → Bob unstakes

Visible:
  ✓ Stake created by some address
  ✓ Unstake happened to some address
  ✗ Cannot link stake to unstake

Hidden:
  ✗ Amount
  ✗ Who → who connection

Full privacy—both addresses and amounts hidden.

UKRC Threshold Decryption

When a legal order requires amount disclosure:

1. Request goes to guardians (e.g., 5 independent entities)
2. Each guardian reviews the legal basis independently
3. m-of-n must agree (e.g., 3-of-5)
4. Combine partial decryptions → plaintext revealed
5. Event logged for audit

┌─────────────────────────────────────────────────────────────────────┐
│                    THRESHOLD DECRYPTION                              │
├─────────────────────────────────────────────────────────────────────┤
│                                                                      │
│  Court Order: "Decrypt TX_123"                                       │
│                                                                      │
│  Guardian 1: Reviews → Approves → partial_1                          │
│  Guardian 2: Reviews → Approves → partial_2                          │
│  Guardian 3: Reviews → Approves → partial_3                          │
│  Guardian 4: Reviews → Declines                                      │
│  Guardian 5: Not needed (3-of-5 reached)                             │
│                                                                      │
│  Combine: partial_1 + partial_2 + partial_3 = plaintext             │
│                                                                      │
│  Result: {sender, recipient, amount} for TX_123 only                 │
│                                                                      │
└─────────────────────────────────────────────────────────────────────┘

Critical properties:

• No single guardian can decrypt alone
• No mass surveillance—each tx needs separate order
• Decryption is logged and auditable
• Guardians can decline frivolous requests

What Gets Revealed

Scenario	Visible	Needs UKRC
L2 transfer	Sender, recipient	Amount only
L2 via stealth	Sender visible	Recipient + amount
L3 stake/unstake	Some activity	Everything
Public transfer	Everything	Nothing

When UKRC Is Triggered

UKRC is designed for legal compliance only:

• Court subpoena
• Regulatory investigation
• Law enforcement request
• Tax authority inquiry

Not for:

• Curious observers
• Business intelligence
• Competitor analysis
• Protocol developers

Enforcement Actions

Blacklist

Block an address from all operations:

Blacklisted address cannot:
  ✗ Send or receive (any layer)
  ✗ Shield or unshield
  ✗ Stake or unstake

Freeze

Block outgoing only:

Frozen address cannot:
  ✗ Send
  ✗ Shield
  ✗ Create stakes

Frozen address CAN:
  ✓ Receive (allows investigation)

Comparison

System	Address Privacy	Amount Privacy	Legal Access	Backdoor
EB	L2: Visible, L3: Hidden	Always hidden	UKRC (m-of-n)	No
Tornado	Hidden	Hidden	None	No
CBDC	Visible	Visible	Central bank	Yes
Bank	Visible	Visible	With warrant	Yes

Summary

EB's compliance model provides:

1. Privacy by default — Amounts always encrypted
2. Visible addresses — L2 supports standard KYC/AML
3. No backdoors — Threshold decryption, not single-party
4. Legal access — Courts can compel decryption via guardians
5. Proportionality — Only specific transactions, not mass surveillance
6. Transparency — All decryptions are logged

For technical details on the UKRC threshold decryption protocol, contact the team.