Path 05 · Regulators & Supervisors
Fabric payment standards are built to be auditable, legally accountable, and compatible with existing AML, KYC, and consumer protection frameworks. The Foundation actively engages with regulators as collaborators — not adversaries.
Design principles
Every architectural decision in Fabric standards is deliberate. The Foundation's view is that financial infrastructure needs to be regulatable to function at scale. These principles are written into the specifications, not aspirational statements.
Every CashPack Operator must be licensed and regulated in the jurisdictions where they operate. The specification defines this as a hard eligibility requirement — the Foundation does not operate Operators and does not intermediate payments.
The party locking funds (the Principal) is KYC-verified by the Operator at issuance. The party redeeming funds is KYC-verified at redemption. There are no anonymous entry or exit points in a compliant deployment.
The Operator retains the complete renewal chain for every instrument. This is not on a public ledger — it is held by the regulated Operator and available under a legal order. The system provides practical privacy, not legally impenetrable anonymity.
The CashPack governance layer requires Operators to enforce per-instrument maximum amounts aligned to their jurisdiction's reporting thresholds. The specification provides explicit reference points for major jurisdictions and requires Operators to publish their limits.
Every conformant Operator must maintain the ability to mark an instrument as CANCELLED in response to a legal order, with funds held pending instruction. This is a mandatory capability in the specification — not optional.
Fabric instruments are closer in legal character to prepaid instruments or cashier's cheques with bearer transferability than to any cryptocurrency or digital asset. The Foundation actively advises against framing that invokes crypto-asset regulatory categories.
AML / KYC model
The CashPack model is not anonymous. It provides practical privacy for intermediate transfers — equivalent to physical cash between known parties — while preserving full identity verification at the two points where funds enter and exit the system.
With physical cash, the issuing central bank and the merchant receiving payment have no record of who held the note between issuance and final exchange. The CashPack model is structurally similar — but materially stronger from a supervisory perspective.
Unlike physical cash: the Operator has a record of who locked the funds (the Principal, KYC-verified). The Operator has a record of who received the funds (the redeemer, KYC-verified). The Operator retains the complete renewal chain — every public key that held the instrument, with timestamps — available under legal process.
Physical cash has none of these properties. The CashPack model provides meaningful privacy for ordinary transactions while giving authorised investigators substantially more than cash ever could.
Payment chain structure
The full renewal chain — all intermediate public keys with timestamps — is retained by the Operator and available under a legal order.
Foundation governance
The Foundation's role is to maintain the specifications and facilitate their adoption — not to operate payment infrastructure, hold funds, or intermediate transactions. Everything normative is published in the open.
Regulatory framing
The Foundation recommends that Operators seeking regulatory approval or sandboxing for CashPack instruments frame them as follows:
"A standardised, operator-controlled, privacy-preserving payment instrument with delayed traceability, strict value limits, and full operator authority — designed as a digital analogue of low-value physical cash."
Operators should avoid framing that invokes cryptocurrency, virtual currency, decentralised money, or alternative monetary systems. The instrument is technically and legally closer to a prepaid instrument or cashier's cheque with bearer transferability than to any crypto asset. This framing is specified in the CashPack governance documentation.
The Foundation is available to brief regulatory staff directly on the technical architecture, governance model, and compliance design of any specification. Regulators interested in observer status in working groups are encouraged to reach out.
For your review
All normative requirements — data structures, cryptographic algorithms, protocol flows, Operator obligations — are in the formal specifications. Nothing normative is held back.
Questions about the architecture, the governance model, or the compliance design of any specification can be directed to the Foundation. Observer participation in working groups is open to regulators and supervisory bodies.
The Foundation welcomes direct engagement from regulatory and supervisory bodies at any stage.