Is It Possible to Automate Regulatory Compliance Checks within a Smart Contract Itself?

Yes, it is possible to automate certain regulatory compliance checks within a smart contract. For example, a contract could be programmed to automatically check an address against an on-chain allowlist or blocklist of sanctioned addresses before allowing a transaction.

It could also enforce rules like transfer restrictions or holding periods for securities tokens. More complex rules, like checking an investor's accreditation status, can be automated by having the contract query a digital identity oracle that provides a verifiable credential.

However, automating the interpretation of nuanced legal text remains a significant challenge.