Auditing Requirements for RWA Smart Contracts

Detailed Instructions

Begin by identifying the jurisdictions where the asset originates, where the token will be sold, and where the issuer and key service providers are based. This determines the applicable regulatory frameworks (e.g., SEC Regulation D/S, MiCA, FinCEN rules).

• Sub-step 1: Document the asset type (e.g., real estate, corporate bond) and its classification under each relevant jurisdiction (security, e-money, utility).
• Sub-step 2: List all regulated functions (issuance, trading, custody, AML/KYC) and map them to the smart contract roles (e.g., owner, transferAgent).
• Sub-step 3: Verify the legal opinion or memorandum confirming the asset's on-chain representation structure complies with local property or securities law.

Tip: Engage legal counsel early. The contract's ability to enforce transfer restrictions is a primary technical reflection of legal compliance.

Detailed Instructions

Smart contracts must technically enforce transfer restrictions mandated by securities laws, such as holding periods for private placements. This is often done through a whitelist managed by a transfer agent role.

• Sub-step 1: Audit the transfer or transferFrom functions for calls to an internal _isAllowedTransfer modifier that checks an on-chain whitelist.
• Sub-step 2: Verify the logic for adding/removing addresses from the whitelist is controlled by a privileged role (e.g., TRANSFER_AGENT_ROLE) and emits events for audit trails.
• Sub-step 3: Check for time-based locks using block.timestamp or a vesting schedule contract to enforce mandatory holding periods (e.g., 12 months for Rule 144).

solidityCopy
// Example modifier for whitelist check
modifier onlyWhitelisted(address from, address to) {
    require(whitelist[from] && whitelist[to], "Transfer restricted");
    _;
}

Tip: Ensure the whitelist management functions are pausable and have multi-sig requirements to prevent unilateral censorship.

Detailed Instructions

Many compliance checks rely on off-chain data. The contract must securely consume attestations from trusted compliance oracles or identity verifiers.

• Sub-step 1: Review the oracle integration pattern. It should use a decentralized oracle network (e.g., Chainlink) or a signed message from a designated compliance provider address.
• Sub-step 2: Verify the signed data structure includes a nonce and expiry timestamp to prevent replay attacks. Check the signature verification logic in the contract.
• Sub-step 3: Confirm failed compliance checks revert transactions and emit events for regulatory reporting. For example, a TransferRejected event with a reason code.

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// Example function snippet using a signature
function transferWithAttestation(address to, uint256 amount, bytes32 nonce, uint256 expiry, bytes memory sig) external {
    require(block.timestamp <= expiry, "Attestation expired");
    bytes32 messageHash = keccak256(abi.encodePacked(msg.sender, to, amount, nonce, expiry));
    require(verifySignature(messageHash, sig, complianceOracle), "Invalid attestation");
    _transfer(msg.sender, to, amount);
}

Tip: The oracle's signing key management is critical. Assess the security and legal liability framework of the compliance provider.

Detailed Instructions

Public blockchains expose all data. Personally Identifiable Information (PII) and sensitive financial details must never be stored in plain text on-chain.

• Sub-step 1: Scan all contract state variables, event logs, and function parameters for direct storage of PII (e.g., names, addresses, tax IDs).
• Sub-step 2: Verify that any necessary references use zero-knowledge proofs (ZKPs) or secure hashes (like a hash of a KYC document ID plus salt). The plaintext data must be held off-chain.
• Sub-step 3: Check for compliance with data localization laws (e.g., GDPR). Ensure the system design clearly separates the public on-chain ledger from the private, permissioned off-chain database holding the mapped sensitive data.

Tip: Use events to emit only commitment hashes or permission grants, not the underlying data. The contract logic should depend on the hash, not the plaintext.

Detailed Instructions

Regulators may require issuers or agents to have the ability to intervene. These administrative controls must be implemented securely and with appropriate oversight.

• Sub-step 1: Identify all functions protected by onlyOwner, DEFAULT_ADMIN_ROLE, or similar. Map each to a regulatory justification (e.g., pauseTransfers for AML freeze, forceTransfer for court order).
• Sub-step 2: Verify that high-risk functions (like seizeAssets) are behind a timelock or require a multi-signature wallet (e.g., 3-of-5 signers) to execute, preventing unilateral action.
• Sub-step 3: Audit event logging for all administrative actions. Each call must emit a detailed event including the reason code and authorizing party, creating an immutable audit trail for regulators.

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// Example of a guarded emergency pause
function pauseAllTransfers(string calldata regulatoryReason) external onlyRole(COMPLIANCE_OFFICER_ROLE) {
    _pause();
    emit TransfersPaused(regulatoryReason, msg.sender, block.timestamp);
}

Tip: The existence and design of these functions should be explicitly acknowledged in the legal offering documents to set investor expectations.

Detailed Instructions

Critical and High severity findings must be addressed before any mainnet deployment. Begin by creating a remediation tracker, such as a spreadsheet or project management issue, that maps each finding to a specific contract file and line number. For RWA contracts, prioritize issues affecting asset custody, oracle price feeds, and administrative privilege escalation first, as these directly impact the underlying real-world value. Assess the exploitability and business logic impact of each medium and low-severity finding; some may be accepted as known risks with documented rationale. This triage should involve both the development team and protocol stakeholders to align on remediation scope and timelines.

Tip: Use the Common Weakness Enumeration (CWE) and SWC Registry classifications from the audit report to understand the root cause of each vulnerability.

Detailed Instructions

For each finding, implement the recommended fix or an equivalent mitigation. For example, to remediate a reentrancy vulnerability in a withdrawal function, apply the Checks-Effects-Interactions pattern. After a centralization risk in an upgrade mechanism, consider implementing a timelock or multisig for privileged functions. All fixes must be accompanied by new or updated unit and integration tests that specifically validate the vulnerability is patched. For RWA-specific logic, such as asset redemption, ensure tests simulate edge cases like underlying asset default or regulatory hold. Run the full test suite and consider using a symbolic execution tool like Mythril or Slither for a preliminary re-scan of the modified code.

solidityCopy
// Example: Patching a reentrancy vulnerability
function withdraw(uint256 amount) public nonReentrant { // Add modifier
    require(balances[msg.sender] >= amount, "Insufficient balance");
    balances[msg.sender] -= amount; // Effects
    (bool success, ) = msg.sender.call{value: amount}(""); // Interactions
    require(success, "Transfer failed");
}

Tip: Maintain a separate git branch for all audit fixes to facilitate a clean re-audit of changes.

Detailed Instructions

Once all critical/high findings are resolved and internally tested, prepare a formal re-audit scope. This typically includes the diff of changes made, the updated test suite, and any new documentation. Submit this package to the original auditing firm for a focused re-audit. The goal is for auditors to verify that the fixes are correct and do not introduce new vulnerabilities. For RWA contracts, explicitly request the re-audit to re-validate the security of asset tokenization logic, oracle integration, and access control mechanisms. Upon completion, the auditor will issue a final report or a letter of attestation confirming the closure of specific findings. Do not proceed to mainnet deployment until the re-audit confirms all critical issues are resolved.

Tip: A re-audit is often a lighter, less expensive engagement than the initial full audit, focused solely on the remediated code.

Detailed Instructions

Deploy the final, re-audited contract suite to a testnet first for a final integration check. Use a phased deployment or proxy upgrade strategy if applicable. Once confirmed, deploy to mainnet. Immediately establish ongoing monitoring. This includes setting up blockchain event monitoring for critical functions (e.g., large withdrawals, admin actions) using services like OpenZeppelin Defender, Tenderly, or custom indexers. For RWA protocols, monitor oracle price feed latency and deviations, as stale data can break loan collateralization. Implement circuit breakers or pause mechanisms for emergency response. Schedule regular manual code reviews for any subsequent upgrades and consider bug bounty programs to crowdsource ongoing security research.

Tip: Maintain an immutable audit log of all deployments and upgrades, including contract addresses and verification links on block explorers.

Detailed Instructions

Security is not a one-time event. Develop a formal incident response plan (IRP) detailing steps if a vulnerability is discovered post-deployment. The plan should define roles, communication channels (including public disclosure procedures), and technical mitigation steps like contract pausing or upgrading. For RWA protocols, coordinate with legal and operational teams, as real-world asset freezes may be required. Establish a routine for dependency updates, ensuring imported libraries (like OpenZeppelin) are kept current. Plan for periodic re-audits, especially before major protocol upgrades or after significant changes to the economic or regulatory environment surrounding the real-world assets. Document all security decisions and risk acceptances transparently for stakeholders.

Tip: Consider engaging a retainer with a security firm for on-call advisory support in case of a suspected incident.