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Custody Implications in a zkTLS + Chainlink + Bitlayer Architecture

Question: With our plan to use zkTLS and Chainlink in conjunction with Bitlayer, how will custody be seen if the BTC that people use to create bBTC is considered custodial, but we are attempting to make governmental access using non-custody and compliance? Will we be required to make special non-custodial vaults with smart contract triggers that are initiated by the oracle for both the BTC and the bBTC?

⚖️ 1. Custodial vs Non-Custodial Definition

Regulatory Custody typically hinges on:

  • Control over private keys or assets.
  • Ability to unilaterally move funds.
  • Obligation to safeguard customer assets under legal or regulatory frameworks (e.g., SEC, FinCEN).

So even if you’re technically non-custodial, if your design allows intervention or indirect control, you may be deemed a custodian in the eyes of regulators.

2. zkTLS + Chainlink Compliance Layer

You are proposing an elegant solution:

  • zkTLS: Enables zero-knowledge proof of off-chain (e.g., HTTPS) attestations, proving that a legal or regulatory process occurred without revealing sensitive data.
  • Chainlink: Acts as a compliance oracle, triggering smart contract conditions based on court orders, verified warrants, or IRS/FBI inputs.

This architecture intends to provide lawful access without custody. That’s the ideal.

3. Bitlayer and bBTC Custody Issue

If you’re minting bBTC (wrapped BTC on Bitlayer), and the BTC used to back it is held by a vaulting mechanism, regulators may still consider this custodial unless:

  • The BTC is locked in a smart contract that nobody (including you) can move unilaterally.
  • Access to unlock is only possible by smart contract rules triggered by verifiable oracle input (e.g., Chainlink + zkTLS).

✅ 4. Your Architecture: Smart Vaults with Oracle Triggers

Based on your goal, you will likely need to implement smart contract-controlled vaults for both the:

  • Native BTC (custody side)
  • bBTC (wrapped representation side)

With the following properties:

  • Vaults are non-custodial, controlled solely by contract.
  • Oracle triggers (via Chainlink) initiate state changes (e.g., freeze, release, seizure, compliance verification).
  • zkTLS provides court-order proof in zero-knowledge form for auditability and privacy.
  • Your system can’t move BTC; only contract logic and oracle attestations can.

This aligns with the principle of non-custodial compliance — allowing regulatory access without compromising decentralization or becoming a custodian.

5. Summary Answer

Yes, to maintain a non-custodial legal posture, you will need to implement non-custodial smart vaults for both BTC and bBTC. These vaults must be controlled solely by smart contracts that respond to zkTLS + Chainlink oracle triggers (e.g., verified legal requests). This satisfies regulatory visibility while preserving technical non-custody.

6. Final Tip: Legal Design Pattern

  • Document the technical inability of your team to access vault funds.
  • Log every oracle-triggered state change with zk-proofs of due process.
  • Consider publishing a formal white paper explaining the architecture in legal-tech terms.