ERC-3643: the token standard for regulated securities

An ordinary ERC-20 token can be sent to any address. A security cannot: transfer restrictions, investor qualification and country rules apply, and the registrar must know who the holder is. The ERC-3643 specification, created on July 9, 2021 and now final, describes itself as an institutional grade security token standard. Its tokens stay ERC-20 compatible and all ERC-20 functions can be called, but every transfer first runs an eligibility and compliance check.

The standard splits the work into several smart contracts. The identity registry links each investor wallet to an identity contract, called ONCHAINID, and a country code. The identity contract holds signed claims, for example that an identity check was passed. A trusted issuers registry lists whose claims count, and a claim topics registry lists which claims an investor needs. A compliance contract holds the rules of the offering, such as investor caps or country restrictions, and answers whether a given transfer may happen.

An agent of the issuer can freeze a wallet or part of a balance, force a transfer to another verified address, and recover tokens for an investor who lost the key to a wallet; the recovery is logged on chain. A transfer agent or a crypto securities registrar uses such functions to correct a register.

The ERC3643 Association is a non-profit association with its address at the Tokeny office in Luxembourg. Its founding members include Apex Group, Tokeny, Invesco, Archax, Bitstamp, Capgemini, Polygon, DFNS and the law firms CMS, DLA Piper and Norton Rose Fulbright. The association states that more than 32 billion US dollars in assets have been tokenized with the standard.

A token standard is one layer of a tokenized security. Which law makes the token a security is a separate question; in Germany it is the Electronic Securities Act and its crypto securities registrar. How the token is identified in market data is a third: the Digital Token Identifier Foundation issues the ISO 24165 code for tokens.

The Digital Token Identifier Foundation, which assigns ISO 24165 codes to digital tokens, is an event and network partner of Finance Loop, and so is the Multichain Asset Managers Association. Finance Loop has a strategic cooperation with 21X, the Frankfurt venue that trades and settles tokenized securities.

An Ethereum token standard for permissioned tokens, also called T-REX. It checks every transfer against an identity registry and a set of compliance rules, which makes it suitable for securities.

The identity contract of an investor in ERC-3643. It holds signed claims from trusted issuers, for example a passed identity check, which the token reads before it allows a transfer.

ERC-3643 tokens are ERC-20 compatible, but each transfer runs eligibility and compliance checks, and an issuer agent can freeze, force-transfer and recover tokens. A plain ERC-20 token has none of these controls.

No. The standard is technology. Whether a token is a security follows from the law, in Germany the eWpG for electronic securities, and a licensed registrar keeps the crypto securities register.