Governance and Compliance in Decentralized Trade Ecosystems

By Stephan Wolf, Chair of the Board of Trustees at Verifiable.Trade Foundation

2026-02-23

Introduction

Governance refers to the framework of rules, processes, and structures through which decisions are made, authority is exercised, and accountability is maintained. It defines who has the right to decide, how decisions are made, and how performance and responsibilities are monitored.

In corporate or trade ecosystems, governance provides the overarching system that ensures alignment of actions with strategic goals, stakeholder interests, and legal obligations. The OECD states “Corporate governance involves a set of relationships between a company’s management, its board, its shareholders and other stakeholders. It provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined.” (OECD, 2015)

Compliance refers to the adherence to established laws, regulations, standards, and policies.

It ensures that organizations and individuals operate within the boundaries of applicable rules, whether they are legal requirements (e.g. data protection laws), contractual obligations (e.g. service level agreements), or internal policies (e.g. codes of conduct). According to ISO 37301 compliance is defined as “the outcome of an organization meeting its obligations.” (ISO, 2021)

Governance and compliance are closely interconnected but distinct:

• Governance sets the framework, defining what should be achieved, who is responsible, and how accountability is structured.

  
  

• Compliance ensures conformity, verifying that the organization’s operations remain within the boundaries defined by governance and external regulations.

In essence, governance provides the strategic direction and mechanisms of control, whereas compliance ensures conformity with prescribed obligations and regulatory requirements. Governance may be conceived as the compass that establishes orientation and guiding principles, while compliance functions as the guardrail that prevents deviation from legal, regulatory, and contractual boundaries. As the Institute of Internal Auditors notes:

“Governance provides the structure within which compliance operates. Effective governance cannot exist without compliance, and compliance has no meaning without governance.” (IIA, 2017)

This aligns closely with the Governance, Risk, and Compliance (GRC) framework, which integrates these elements into a holistic model of organizational oversight. The Open Compliance and Ethics Group (OCEG) defines GRC as “the integrated collection of capabilities that enable an organization to reliably achieve objectives, address uncertainty, and act with integrity” (OCEG, 2016).

Within this framework:

• Governance establishes the structures, policies, and decision-making processes through which objectives are set and accountability is ensured.

  
  

• Risk management provides the mechanisms to anticipate and mitigate uncertainty that may affect the achievement of objectives.

  
  

• Compliance assures that actions remain within the boundaries set by laws, regulations, standards specific policies set by an organization.

Thus, governance without compliance risks being aspirational rather than enforceable, while compliance without governance risks being reactive and fragmented. Integrated under the GRC model, they together ensure that organizations not only set direction but also remain on course in a lawful, ethical, and resilient manner.

Decentralized Governance in Trade Ecosystems

Governance in digital trade ecosystems spans three interdependent domains: legal, technical, and organizational.

1. Legal governance establishes the framework of rights, responsibilities, and liabilities. As UNCITRAL has emphasized, “the proper functioning of international trade depends upon a predictable and transparent legal environment” (UNCITRAL, 2017).

   
   

2. Technical governance translates these principles into operational controls — through protocols, APIs, system standards, and audit mechanisms. ISO notes that “technical interoperability is inseparable from governance interoperability” (ISO/IEC 20000, 2018).

   
   

3. Organizational governance provides structures for oversight, ensuring that diverse stakeholders remain aligned while maintaining distributed accountability.

Trading contracts serve as governance instruments in their own right.  They “assign roles, responsibilities, and timelines” and embed escalation and dispute resolution mechanisms. By integrating Service Level Agreements (SLAs), contracts operationalize expectations. SLAs define measurable criteria, mandate monitoring, and provide remedies in case of breach. As noted in IT governance research, “SLAs function as the enforceable bridge between contractual abstraction and operational performance” (Weill & Ross, 2004).

Any ecosystem benefits from a structured governance approach.

The Verifiable.Trade Foundation outlines a three-layer model:

1. Legal and Regulatory Layer – shaped by international conventions (e.g.,, CISG, WTO trade rules), national contract laws (e.g. Swiss Code of Obligations, Universal Commercial Code), and regulatory frameworks such as the EU General Data Protection Regulation  (GDPR) in Europe or Regional Comprehensive Economic Partnership (RCEP) in Asia.

   
   

2. Contractual Layer – encompassing commercial contracts, SLAs, escalation clauses, and liabilities.

   
   

3. Technical Layer – embedding governance in code through APIs, audit logs, security, and authority delegation. This reflects Lawrence Lessig’s assertion that “code is law” (Lessig, 1999), where technical protocols act as governance mechanisms in their own right.

   
   

Decentralized governance does not operate in a vacuum but interacts with external frameworks and institutions:

• Public sector frameworks, e.g. WTO rules, customs regulations, eIDAS, and arbitration authorities. These provide normative and enforcement anchors.

  
  

• Private sector standards, e.g. Trust over IP, ISO 20000 for service management, COBIT for IT governance, and data governance models such as EDM Council’s CDMC/DCAM.

As scholars of transnational governance argue, “authority in global trade is no longer exercised exclusively by states, but increasingly through hybrid arrangements of public and private rulemaking” (Abbott & Snidal, 2009).

The governance of trade ecosystems is decentralized by default. Each trade relationship differs by applicable law, individual contracts, operational and technical constraints. Decentralized governance in trade ecosystems is therefore not a singular mechanism but a convergence of law, contract, and code. This must be supported by any technical system. Forcing rules and conditions on trading partners will not lead to true trade digitalization. Even regulators have accepted the fact that regulation is usually national, leaving to discrepancies when operating internationally. Recent developments try to harmonize this for conglomerates of states, e.g., ASEAN Single Window (ASW). However, this is far from being complete and will certainly not harmonize law and regulation on a global scale.

This is a major issue when using universal platforms. They often force their own governance model over the partners, establishing therefore an (unwanted) agent in the middle. Examples in retail demonstrate the power of those platforms over their stakeholders. Hence governance considerations by platforms will lead to siloed approaches, geographical diversity and the need for a mashed network of bilateral agreements, standards, APIs etc. There is no “one size fits all”.

ISTTP has been suggested to overcome these issues. It complies with multiple trade laws and regulations, in particular any ML-ETR implementation, as well as contractual freedom for the acting parties and different data standards. As open-source project it allows for individual extensions and different implementations.

This unique proposal operates without requiring changes to legacy systems and does not call for new regulation beyond implementing the Model Law on Electronic Transferable Records (ML-ETR). It avoids central components and their governance frameworks such as databases, APIs, or blockchains. Instead, it operates entirely on a peer-to-peer basis. Governance models for agreements and operations can be defined bilaterally and remain flexible. In order to support decentralized governance, Verifiable.Trade Foundation aims to provide model language for individual agreements. This should make it easy for trading parties to come to agreements on these terms.

We are living in a multi-polar world. There will be no single platform serving all parties around the world. This motivates the concept of “ecosystems” and “peer-to-peer” interaction, requiring decentralized governance. This is where the ISTTP protocol provides the differentiating factor of what Verifiable.Trade Foundation does compared to past attempts.

References

Abbott, K. W., & Snidal, D. (2009). The Governance Triangle: Regulatory Standards Institutions and the Shadow of the State. International Organization, 63(1), 1-38.

Institute of Internal Auditors (IIA). (2017). International Professional Practices Framework (IPPF).

ISO/IEC 20000 (2018). Information Technology — Service management.

ISO (2021). ISO 37301 Compliance Management Systems — Requirements with Guidance for Use.

Lessig, L. (1999). Code and Other Laws of Cyberspace. Basic Books.

OECD. (2015). G20/OECD Principles of Corporate Governance.

UNCITRAL (2017). UNCITRAL Model Laws. United Nations Commission on International Trade Law.

Verifiable.Trade Foundation. (2025). Global Digital Collaboration Conference: Decentralized Governance.

Weill, P., & Ross, J. W. (2004). IT Governance: How Top Performers Manage IT Decision Rights for Superior Results. Harvard Business School Press.

OCEG. (2016). GRC Capability Model (Red Book). Open Compliance and Ethics Group.