The Token standard for RWA Tokenization
The ERC3643 protocol is an open-source suite of smart contracts that enables the issuance, management, and transfer of permissioned tokens. Its built-in decentralized identity framework ensures only users meeting pre-defined conditions can become token holders, even on permissionless blockchains.
ERC-3643 is a token standard designed to bring regulatory compliance and control to the world of blockchain-based securities and tokenized assets. This standard, formalized in the Ethereum Improvement Proposal (EIP) ERC-3643, introduces the concept of permissioned tokens, ensuring that only eligible investors can hold and transfer these tokens.
ERC-3643 tokens are a special type of token that incorporates compliance measures directly into their design. Unlike traditional ERC-20 tokens, which can be transferred freely between any two addresses, ERC-3643 tokens include mechanisms to verify the identity and eligibility of participants before allowing transactions. This ensures that all transfers adhere to predefined compliance rules, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. By identifying all relevant parties such as issuers, agents, investors, and others, it also enables the tracking of legal ownership for digital assets, thereby safeguarding token holders.
Identity Management: ERC-3643 tokens are linked to on-chain identities managed by an open-source system known as ONCHAINID. Each participant’s identity is verified by authorized parties and stored on the blockchain, allowing for seamless and secure identity management.
Permissioned Transfers: Transfers of ERC-3643 tokens are governed by a set of compliance rules. Each transaction is checked against these rules, and only those that meet all the criteria are executed.
Compliance by Design: The standard ensures that all regulatory requirements are met before any transaction is completed. This includes verifying the investor's identity and ensuring they have the necessary credentials to hold the token. It is also possible to add Compliance Modules and to enrich the AssetID of the token.
Interoperability: Despite their enhanced security and compliance features, ERC-3643 tokens maintain compatibility with existing ERC-20 platforms and tools. This means they can be integrated into existing blockchain ecosystems with minimal modifications.
The introduction of ERC-3643 tokens addresses a significant gap in the blockchain ecosystem. While cryptocurrencies and utility tokens have demonstrated the potential of blockchain technology for efficient and decentralized asset transfer, they often fall short when it comes to regulatory compliance. Security tokens, representing real-world assets such as equity or debt, require strict adherence to financial regulations. ERC-3643 provides a robust framework to meet these requirements, opening the door for broader adoption of blockchain technology in regulated financial markets.
