March 27, 2024
Ethereum's ERC-3643 Gains Approval, Paving the Way for Secure Asset Tokenization
Latest Cryptocurrency News

Ethereum’s ERC-3643: Advancing Tokenization for Real Assets in Compliance

The Ethereum community has given its formal approval to the ERC-3643 Ethereum Improvement Proposal (EIP), establishing it as the recognized standard for compliant tokenization of real-world assets (RWAs). As of a Dec. 15 announcement, the proposal has attained its ultimate status, signifying its thorough review, discussion, and consensus within the Ethereum community.

This process mirrors the establishment of previous standards like ERC-20 and others that gained popularity. ERC-3643 serves as a comprehensive standard encompassing securities tokenization, RWAs, payment systems, and loyalty programs. It validates a user’s entitlement to a token through a self-sovereign identity (SSI) framework, offering both anonymity and verifiable credentials, as detailed by the proposers.

This approved standard, initially proposed in 2021, extends upon ERC-20 and integrates two distinct permission layers aimed at bolstering security and adherence to regulations.

The primary layer concentrates on verifying the identity and eligibility of the transaction recipient, utilizing ERC-734 and 735 standards to confirm the presence of necessary claims on the identity, authenticated by trusted claim issuers. The second layer imposes global constraints on the token itself, including limitations on daily token volume and the maximum token holder count, facilitating controlled and regulated token circulation.

Asset tokenization refers to converting the value of a physical or digital asset into a digital token on a blockchain or distributed ledger. This process brings potential advantages such as heightened liquidity, expedited settlements, transparency, and accessibility across diverse markets. Real-world applications encompass enabling fractional trading of real estate, art, financial assets, and intellectual property.

Roland Berger, a management consulting firm, predicts that by 2030, the asset tokenization market will soar to a value of $10 trillion, a significant leap from the present value of around $300 billion. Asset tokenization stands out as a prominent trend in finance, garnering interest from a broad spectrum of traditional and crypto-native enterprises. Notable entities exploring this technology include JPMorgan, Goldman Sachs, and Societe Generale. Despite challenges faced by the crypto industry, data from VanEck Research indicates that the total market capitalization for RWAs reached $342 billion in September.

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