RISK MANAGEMENT AND GOVERNANCE

Kill Switch

A governance mechanism embedded in a smart contract or AI system that allows authorized operators to pause, halt, or reverse operations in the event of a malfunction, attack, or regulatory directive.

EXAMPLE

The OCC has signaled that any bank deploying autonomous on-chain agents must demonstrate a tested kill switch capable of halting operations within seconds of a governance trigger.

Relevant Roles and Functions

On-chain Role
Chief Technology
Operational Risk Officer

Related Terms

Agentic Finance

The use of autonomous AI agents—capable of interpreting intent, evaluating market conditions, and executing multi-step financial operations—within on-chain environments. Agentic systems go beyond rule-based automation by exercising judgment within defined guardrails.

Example

An agentic treasury system at a global bank monitors real-time on-chain liquidity, automatically rebalancing stablecoin positions across chains based on yield and risk parameters set by human operators.

Human-in-the-Loop

A governance model in which a human decision-maker must approve or review AI or automated system outputs before they execute consequential financial actions, preserving accountability while leveraging automation.

Example

Autonomous AI agent initiates crypto trades, swaps, or transfers on blockchains, but the transaction must be manually approved by a human on their Ledger device before the smart contract executes the transfer of value.

Smart Contract

Self-executing code deployed on a blockchain that automatically enforces and carries out the terms of an agreement when predefined conditions are met—without requiring an intermediary to oversee performance.

Example

A smart contract can automatically release collateral when a loan is repaid, eliminating manual processing and reducing operational risk.

On-Chain Compliance

The embedding of regulatory requirements—KYC/AML checks, transfer restrictions, investor eligibility rules, and reporting obligations—directly into token logic or smart contracts, enabling automated enforcement at the point of transaction.

Example

Securitize embeds on-chain compliance into tokenized fund transfers so that accredited investor checks run automatically before any secondary market transaction settles.