Decentralized Compliance: A Blockchain Approach to Contextual Rule Interpretation

Compliance with regulatory rules often requires contextual interpretation, balancing legal intent, business objectives, and professional diligence. However, the digitalization of rule enforcement typically reduces interpretive flexibility, reducing compliance to rigid, predefined checks. A key challenge is that regulatory vagueness, often viewed as a design flaw, is a feature that enables adaptive decision-making in complex, variable contexts. This paper introduces a blockchain-based framework for decentralized compliance, allowing organizations to encode and manage their rule interpretations as smart contracts. These interpretations act as verifiable digital references while preserving flexibility in compliance enforcement. The proposed system includes a cryptographic compliance watermarking mechanism (cryptographic bindings that link compliance interpretations to data and rule context), to ensure traceability and accountability. The framework supports cooperative compliance across organizations without enforcing a centralized model by leveraging blockchain's tamper-evident and distributed architecture. Our analysis explores technical feasibility, scalability considerations, and applications in the construction industry. This work contributes to the advancement of compliance tech by demonstrating how decentralized systems can assist interpretive nuance while maintaining transparency and trust.