ERC-3643: The Tokenization Standard Revolutionizing Regulatory Compliance

Blockchain technology is transforming the way we interact with assets, and the tokenization of real-world assets (RWAs) is one of the most promising areas. However, tokenizing regulated assets, such as securities or real estate, presents unique challenges in terms of regulatory compliance. This is where ERC-3643 comes in, a token standard that is revolutionizing how businesses approach compliance in the blockchain space.

History of ERC-3643

Initially known as the T-REX protocol, ERC-3643 was created and developed to address the need to enforce regulatory compliance through digital identity and verifiable credentials 1. Unlike permissionless ERC-20 tokens, tokenized securities need to be controlled and permissioned. The token standard was designed to meet these needs, while maintaining compatibility with any ERC-20 application. In 2021, it was submitted as an Ethereum Improvement Proposal (EIP), a vital step to propose and implement updates and standards on the network 1. Finally, in 2024, ERC-3643 reached 'Final' status in its EIP, a major milestone recognized by the Ethereum community 1. The creation of the ERC3643 Association, a collaborative effort between key industry players, seeks to accelerate the global adoption of the standard for real-world asset tokenization 1.

What is ERC-3643?

ERC-3643 is a set of open-source smart contracts that enables the issuance, management, and transfer of permissioned tokens 2. In essence, it is a standard for security tokens designed to ensure that all transactions comply with securities laws 3. This makes it a powerful tool for managing RWAs on the blockchain.

One of the key features of ERC-3643 is its compatibility with the ERC-20 standard, widely used to create tokens on the Ethereum blockchain 3. This means that any application that supports ERC-20 tokens can also support ERC-3643 tokens without modification, facilitating its integration into the existing Ethereum ecosystem.

ERC-3643 allows market actors to enforce trust, compliance, and control on a shared infrastructure, improving asset transferability 4. Unlike permissionless ERC-20 tokens, ERC-3643 tokens are permissioned tokens that utilize smart contract technology to define conditional transfer functions, enabling compliance structures for regulated assets like securities, while retaining standard ERC-20 functionality 5.

ERC-3643 and Regulatory Compliance

ERC-3643 addresses regulatory compliance in several ways:

●?????? Identity management: ERC-3643 uses digital identity to whitelist users through verifiable credentials, ensuring the compliance validation process is performed entirely on-chain while protecting privacy 5. This means that only users who meet predefined conditions can become token holders, even on permissionless blockchains. Its decentralized identity framework, ONCHAINID, ensures that only users who meet predefined conditions can become token holders, even on permissionless blockchains 6.

●?????? Access control: The standard allows for the implementation of granular access controls, ensuring that only authorized parties can perform certain actions, such as transferring tokens or accessing confidential information.

●?????? Compliance with specific regulations: ERC-3643 can be adapted to comply with a wide range of specific regulations, such as KYC (Know Your Customer) and AML (Anti-Money Laundering) rules 7. This is achieved by integrating compliance logic directly into the smart contracts governing the tokens and linking RWA tokens to verified on-chain identities through a decentralized identity system 8.

Technical Operation of ERC-3643

ERC-3643 is based on a token structure that includes clearly defined roles and permissions.

·?Issuer: The entity responsible for creating and issuing the tokens.

·?Investor: The token holder, which can be an individual or legal entity.

·?Compliance agent: The entity responsible for verifying compliance with rules and regulations.

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ERC-3643 smart contracts define the rules and conditions that govern the transfer of tokens. These rules may include KYC/AML requirements, jurisdictional restrictions, and ownership limits. In addition, it includes specific functions such as setOnchainID to set the on-chain identity of the token and setIdentityRegistry to link the token to a decentralized identity registry 8. These functions are crucial to ensure regulatory compliance and security in the issuance and transfer of tokens.

Benefits of ERC-3643 for Businesses

ERC-3643 offers several advantages for businesses seeking to tokenize real-world assets:

●?????? Efficiency: Automating compliance through smart contracts reduces the need for manual processes, increasing efficiency and reducing costs.

●?????? Transparency: All transactions and actions related to tokens are recorded on the blockchain, providing a transparent and immutable record.

●?????? Security: The underlying blockchain technology ensures the security and integrity of tokens, reducing the risk of fraud and manipulation.

●?????? Interoperability: Compatibility with ERC-20 facilitates integration with other DeFi applications and platforms. A key aspect is that ERC-3643 enables compliance structures while retaining the functionality of ERC-20 tokens. This facilitates integration with existing DeFi platforms and gives businesses access to a wider range of financial services, such as decentralized trading, lending, and staking.

Furthermore, the improved transferability offered by ERC-3643 can unlock liquidity and create new opportunities in traditionally illiquid markets 4. By facilitating the transfer of ownership of tokenized assets, ERC-3643 can increase market efficiency and reduce transaction costs.

ERC-3643: Ideal for Regulated Projects

ERC-3643 is an ideal solution for regulated projects, especially in sectors such as real estate and finance, where regulatory compliance is paramount 9.

In the real estate sector, ERC-3643 can facilitate the tokenization of properties, allowing investors to buy and sell tokens that represent a portion of a real estate asset 3. This reduces barriers to entry for real estate investment and increases market liquidity.

In the financial sector, ERC-3643 can be used to tokenize a variety of assets, such as securities, funds, and debt instruments. This can improve the efficiency of financial markets, reduce transaction costs, and increase access to investment.

Tokenization of Commodities: ERC-3643 also has applications in the tokenization of commodities, such as precious metals (gold, silver), agricultural products (coffee, wheat), and natural resources (oil, gas) 9. This allows for fractional ownership of these assets, facilitating trade and tracking provenance on the blockchain.

Dapps Factory: Leading Provider of Tokenization Infrastructure

Dapps Factory is a leading provider of tokenization infrastructure offering ERC-3643-based solutions. Their expertise in blockchain technology and regulatory compliance allows them to help businesses tokenize real-world assets securely and efficiently. https://DAppsFactory.io

Conclusion

ERC-3643 is playing a crucial role in the evolution of real-world asset tokenization. By providing a solid framework for regulatory compliance, this standard is opening up new possibilities for businesses seeking to harness the power of blockchain technology. Its importance in sectors such as real estate and finance is undeniable, and its widespread adoption could drive the next wave of innovation in capital markets. The ability of ERC-3643 to facilitate the tokenization of regulated assets in a compliant and efficient manner positions it as a key driver for the mass adoption of blockchain technology across various sectors.

Synthesis

The ERC-3643 standard offers a robust framework for the tokenization of real-world assets, addressing regulatory compliance concerns through identity management, access control, and adaptability to specific regulations. Its compatibility with ERC-20 facilitates integration into the Ethereum ecosystem, while its role and permission structure, along with functions such as setOnchainID and setIdentityRegistry, ensure security and transparency. ERC-3643 offers businesses efficiency, transparency, security, and interoperability, making it an ideal solution for regulated projects in sectors such as real estate, finance, and commodity tokenization. Dapps Factory stands out as a leading provider of ERC-3643-based tokenization solutions, driving the adoption of this transformative technology that promises to revolutionize the way we interact with assets in the future.

Sources

1. History of ERC-3643, acceso: enero 15, 2025, https://www.erc3643.org/history-of-erc-3643

2. DApps Factory ?https://DAppsFactory.io

3. T-REX Unleashed: How ERC-3643 is Transforming Security Tokens and Real-World Assets, acceso: enero 15, 2025, https://blog.solichain.com/t-rex-unleashed-how-erc-3643-is-transforming-security-tokens-and-real-world-assets-9312e4b64872

4. ERC-3643 - An Official Standard for Permissioned Tokens - Tokeny, acceso: enero 15, 2025, https://tokeny.com/erc3643/

5. ERC-3643: Unveiling the Future of Financial Compliance in Security Token Contracts, acceso: enero 15, 2025, https://www.merklescience.com/erc-3643-unveiling-the-future-of-financial-compliance-in-security-token-contracts

6. ERC3643 - The Token Standard for RWA Tokenization, acceso: enero 15, 2025, https://www.erc3643.org/

7. Understanding ERC-3643: An Emerging Standard for Regulated Tokens - Chainlens, acceso: enero 15, 2025, https://www.chainlens.com/post/erc-3643-a-new-standard-for-regulated-tokens-explained

8. ERC-3643 Real World Assets (RWA) - Hedera Docs, acceso: enero 15, 2025, https://docs.hedera.com/hedera/core-concepts/smart-contracts/tokens-managed-by-smart-contracts/erc-3643-real-world-assets-rwa

9. How ERC-3643 is Transforming Real-World Assets Tokenization? - Codiste, acceso: enero 15, 2025, https://www.codiste.com/how-erc-3643-transforming-real-world-assets-tokenization-rwa