The ERC-3643 is a token standard for real-world asset tokenization, with an ‘open-source suite of smart contracts’ which facilitate the ‘issuance, management and transfer of permissioned tokens’. The standard is an extension of the ERC-20 standard (a well-established standard for fungible tokens), with a a distinct compliance layer through a conditional transfer function. This ensures that token transfers are only executed after approval from a validator which verifies compliance with pre-defined governance criteria.
Tokeny, a leading compliance infrastructure provider for asset tokenisation, first developed the standard in 2018 under the name T-REX (Token for Regulated Exchanges). Upon acceptance by the Ethereum Community last December, the standard was given the current label, ERC-3643. The standard is now backed the ERC3643 Association tasked with driving its adoption through education and coordinating key stakeholders. To date, the total value of assets tokenized using the standard exceeds USD$28B.
By creating ERC-3643 with the Ethereum technology stacks, we ensure the interoperability…with other applications in the ecosystem.
Encoded compliance (where rules are embedded within the token at the smart contract level);
Issuers with greater control over securities;
Reduced costs;
Increased transferability and liquidity.
The official whitepaper, dated May 2023, explains the standard was:
Designed to address this need to support compliant issuance and management of permissioned tokens, that are suitable for tokenized securities, either on a peer-to-peer basis or through regulated trading platforms.
ERC-3643 tokens can readily tokenise traditional financial assets today, as their permissioned qualities enable compliance with existing AML and registry requirements. The tokens are also compatible with most existing ERC-20 standard based platforms and can be integrated with minor modifications. The ERC-3643 can be adapted for real-world assets, securities, stablecoins, E-money and loyalty programs, however, new applications continue to be explored.
On 9 April 2024, Tokeny announced its partnership with the SILC Group to pilot alternative assets through tokenisation using the ERC-3643 standard. The pilot project will assess the potential of blockchain to ultimately replace the various legacy centralized systems that are used to administer funds used by SILC.
Efforts to drive adoption of ERC-3643 are ongoing, with DevPro and Tokeny jointly releasing an open-source UI component for the standard in January 2024. This plug-in bridges ERC-20 compatible DeFi applications with permissioned tokens issued under the ERC-3643 standard, ensuring interoperability.
With the ERC-3643 bringing ‘compliance into the realm of permissionless DeFi’, the standard offers a pathway for traditional financial assets to trade on public blockchains. This is likely to foster increasing institutional interest in adopting blockchain technology to unlock the efficiencies of smart contracts in trading and asset administration, and with a view to increasing tokenisation of financial markets.
Written by Kelly Kim, Steven Pettigrove and Michael Bacina