Written by Daniel Coheur co-founder Tokeny
The proven standard for digital securities
The ERC3643 is a suite of smart contracts that enables issuers to mint and manage identity-based permissioned tokens to enforce compliance. These tokens only allow users who meet eligibility rules to become token holders by verifying the credentials of users’ digital identities. These credentials are issued by third parties of the issuers’ choices, be it a KYC provider, a bank or a government, etc. The identity-based whitelisting approach makes ERC3643 the most suitable standard for digital securities, as it ensures compliance while enabling on-chain and automated validation processes. Thus, compliant peer-to-peer transfers of digital securities are allowed, enabling their transferability. Aside from ensuring compliance, ERC3643 has more than 120 smart contract functions, enabling issuers to fully control their digital securities such as blocking and unblocking tokens, performing bulk operations and delegating responsibility for operations to third parties. The ERC3643 standard has already been used to tokenise over $28 billion in assets, including stablecoins and all types of assets: fine art, real estate, funds, debt, private equities, bonds, commodities, and more.
Standardisation brings interoperability
With a 5-year track record, ERC3643 is trusted by large financial institutions whereby making it the standard for digital securities. In addition, it has also been audited by Kaspersky (one of the world’s leading cybersecurity firms) ensuring the security of the code. This standardisation is the catalyst for the adoption of tokenisation as it allows all participants to rely on the same logic and functionality; stakeholders don’t need to waste time reinventing the wheel but directly benefit from an interoperable ecosystem.
Interoperability is the key to opening the door for more innovative use cases using blockchain technology. ERC3643 also enables cross-chain interoperability for digital by enabling tokens to carry out compliance rules and data and be securities on any EVM blockchain network whilst having the same token address. And there is already a complete ecosystem of builders including consulting companies (eg, big four), law firms (eg, CMS), custody providers (eg, Fireblocks), tokenisation solution providers (eg, Tokeny), valuation-as-a- service providers (eg, Inveniam), and liquidity providers (eg, Oasis Pro).
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Driving liquidity of digital securities
Digital securities issued using the ERC3643 standard are able to interact with all service providers in the ecosystem. For example, when a private asset is tokenised, it needs to be valued — the price valuation provided by a valuation oracle is linked on-chain to the token and provided to the liquidity where the token is listed. As compliance rules are also embedded in the digital securities, issuers can always ensure only eligible transactions can be triggered, allowing token holders to conduct secondary trading via trading venues or with an eligible counterparty, improving the liquidity of assets.
As the ecosystem continues to evolve, it will eventually bring digital securities to DeFi (eg, collateralisation), where the full potential of blockchain-based securities, paving the way for issuers and ecosystem stakeholders to lies to create new revenue streams by providing innovative services. The future of digital securities is exciting and full of possibilities, and it all starts right here, with standardisation.
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