ERC-3643: The RWA Tokenization Standard
Leading digital platforms have united under the ERC-3643 Association, which was registered in Luxembourg under the codename "T-REX Protocol". This new token standard for digitizing real-world assets and securities is currently gaining momentum in the market.
The Association has already attracted influential players in the blockchain market:
- Oasis Pro,
- Aztec Group, and others.
These are prominent companies controlling private capital markets and trading platforms that offer not only cryptocurrencies but also tokenized real-world assets (RWA). The total volume of tokenized RWAs under their management is estimated at $28 billion.
Members of the alliance have developed joint standards for the standard and have begun testing it.
What is ERC-3643?
ERC-3643 is an adaptation of the ERC-20 standard, which is the most widespread standard for Ethereum tokens. While ERC-20 specifies basic functions for tokens (transfer, creation, and burning), ERC-3643 enables setting specific compliance rules for transactions.
These rules can include contract-specified restrictions, such as:
- The minimum age of the token holder,
- The financial history and income of participants,
- The geolocation of transaction participants,
- The type of wallet used.
At its core, the T-REX protocol is still a set of open-source smart contracts that facilitate the issuance, management, and transfer of permitted tokens. Its distinctive feature is the built-in decentralized user identification system, ONCHAINID. It ensures only users who meet pre-defined conditions can engage in a contract.
How does ERC-3643 work?
The T-REX protocol is compatible with any decentralized applications that support the ERC-20 standard. ERC-3643 compliance rules are enforced by validators who verify transactions for compliance with the requirements and reject transactions that do not meet the set criteria. Meanwhile, the protocol protects user privacy, not disclosing their actual data to external observers.
Validators can be appointed by the token issuer (the ERC-3643 Association) or organizations using the proposed protocol. They receive compensation for their work in tokens of the new standard.
Where can the ERC-3643 standard be used?
ERC-3643 can be applied to tokenize a broad spectrum of regulated assets, including:
- Securities. The standard can be used for tokenizing stocks, bonds, and bills. This can make securities accessible to large investors and reduce the costs of issuing and trading them.
- RWA (Real World Assets). ERC-3643 is suitable for tokenizing real estate, art, and precious metal bars. This will make assets more liquid and available for sale worldwide.
- Loyalty tokens. The new standard can be used for transferring loyalty tokens that provide users with discounts and specified program benefits. ERC-3643 can make marketing efforts more effective and profitable for businesses and their clients.
Prospects for ERC-3643
ERC-3643 has the potential to become the main standard for RWA tokenization. The advantages of such smart contracts make them attractive to issuers, users, and regulators. After widespread adoption of the new standard, active tokenization of RWA can be expected, which will undoubtedly impact the global financial system:
- Banks will be able to tokenize their mortgage loans, attracting more investors and reducing operational costs for loan servicing.
- Financial companies can tokenize their stocks, expanding the circle of investors and increasing the liquidity of securities.
- Retail trading companies will have the opportunity to tokenize loyalty programs, offering their customers more personalized deals.
Financial regulators have also welcomed the new standard with optimism. While the personal data of transaction participants will not be disclosed on the network, government controllers will be able to check the terms of the smart contract for compliance with legal norms. The EVM-compatible T-REX protocol will exclude the possibility of participation in operations by minors, citizens, or companies from sanctioned countries, and other unreliable persons.