The financial industry has undergone a significant transformation with blockchain technology. Initially invented as the foundation for cryptocurrencies like Bitcoin, blockchain has since evolved into a robust, global, independent infrastructure enabling the digital representation of assets far beyond cryptocurrencies. This process, known as tokenization, is revolutionizing how traditional assets — such as dollars, equities, bonds, commodities, and even real estate — are issued, transferred, and managed.
At its core, a blockchain is a decentralized, immutable digital ledger that records data and transactions across a distributed network of computers. Public blockchains, such as Ethereum, are open to anyone, ensuring transparency and security without dependence on a central authority (permissionless). These networks are trustless, meaning that transactions are verified through cryptographic algorithms rather than intermediaries such as banks or other financial institutions. However, while public blockchains offer decentralization and security, they also present challenges when dealing with regulated assets, where compliance with financial and legal frameworks is essential.
Tokenization refers to the process of converting real-world assets into digital tokens on a blockchain. These tokens can represent ownership in securities, commodities, or non-financial assets, such as intellectual property or even concert tickets. As these tokens are issued on existing blockchains, tokenization leverages the immutability and transparency of the blockchain and the liquidity of the global crypto market, while also enabling fractional ownership and streamlining settlement processes. As tokenized assets can be traded without the need of a centralized financial institution, they can be instantly settled 24 hours a day and 7 days a week, for only a fraction of the time and costs of a traditional settlement.
Tokens are issued following a specific token standard, a template that has been thoroughly audited and tested, such as ERC-20 (which governs fungible tokens, such as crypto-assets and stablecoins) and ERC-721 (which governs non-fungible tokens, or NFTs). However, these traditional token standards lack compliance mechanisms, making them unsuitable for regulated financial markets.
Rather than creating a new (private) blockchain with compliance mechanisms — thus not leveraging the security, liquidity, reputation, transparency, and functionalities of existing blockchains — a new token standard was developed: ERC-3643 (formerly known as the T-REX Protocol). This standard ensures the tokens are permissioned, meaning only authorized participants can purchase, sell, hold, and transfer them. This is achieved by integrating all types of compliance rules directly into the code of the token template, safeguarding adherence with legal and financial regulations.
ERC-3643’s Compliance by Design
ERC-3643 is an open-source suite of smart contracts designed to enable the issuance, management, and transfer of permissioned tokens on public blockchains like Ethereum. Unlike traditional token standards that allow unrestricted transferability, ERC-3643 integrates compliance mechanisms directly into the token’s code. This ensures that only individuals or entities meeting predefined conditions can hold, purchase, sell, or transfer these tokens, thereby, maintaining strict adherence to regulatory frameworks.
Embedded permissions can include conditions related to investor eligibility, for instance ensuring that only accredited investors can purchase certain security tokens or tokenized corporate bonds. Additionally, jurisdictional restrictions can prevent transfers to addresses linked to prohibited countries or regions, and Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance checks verify that all token holders meet the necessary legal standards. Assets can automatically be blocked and unblocked based on certain conditions. Furthermore, transfer restrictions can be applied, such as implementing lock-up periods or conditions for token resale. This permissioned structure makes ERC-3643 particularly suitable for any type of regulated market where maintaining control over asset distribution is crucial.
One of its key compliance innovations is the integration with ONCHAINID, a decentralized identity framework that links blockchain addresses to verified identities, thereby, overcoming the pseudonymity of blockchains. ONCHAINID allows for dynamic compliance, where token holders’ status can be updated in real-time based on changes in their compliance status, such as the expiration of KYC documents. The verification process is seamless, reducing the need for manual oversight and streamlining both onboarding and compliance management. ONCHAINID maintains user privacy by ensuring sensitive personal data is not stored on the public blockchain, preserving the integrity of personal information while enforcing compliance. Through ONCHAINID, ERC-3643 tokens can adapt to regulatory changes or updates in real-time without the need for reissuing tokens or manual interventions. Rather than relying on external monitoring or after-the-fact reporting, compliance requirements are embedded directly into the token’s smart contracts ensuring continuous, automated enforcement of regulatory rules.
In short, the compliance mechanisms can cover a wide range of regulatory requirements, including AML measures and accredited investor verification. Financial regulations are adhered to according to jurisdiction-specific and/or instrument-specific rules. Additionally, reporting mechanisms are automated to fulfill obligations for regulators, issuers, and compliance officers, while transaction monitoring ensures the continuous assessment of transactions to detect suspicious activities in real-time. By embedding these rules directly into the code, ERC-3643 mitigates the risk of human error, enhances regulatory oversight, and fosters trust among stakeholders. By combining permissioned tokens, verifiable on-chain identities, and embedded compliance mechanisms, it offers a robust framework for issuing and managing digital assets in a secure, transparent, and regulatory-compliant manner.
Application of ERC-3643
Beyond theoretical concepts, ERC-3643 has already found practical applications across various sectors, particularly in regulated financial markets. For example, it facilitates the issuance of digital securities, enabling companies to tokenize equity, debt instruments, and funds. The standard supports real estate tokenization, allowing properties to be divided into digital shares that can be traded efficiently, offering increased liquidity to traditionally illiquid markets. Its design seems to cater to the needs of institutions that require strict compliance controls while leveraging the benefits of blockchain technology.
In the commodities sector, ERC-3643 enables the tokenization of assets like precious metals, making it easier to digitally fractionalize ownership and streamline transactions. It may also provide applications in structured financial products and private markets where regulatory oversight is stringent. By embedding compliance mechanisms at protocol level, ERC-3643 reduces administrative burdens while ensuring regulatory adherence, making it an ideal solution for financial institutions aiming to innovate securely.
Utilizing Tokenization Platforms
Creating secure smart contracts on the ERC-3643 standard requires specialized technical knowledge and expertise in blockchain development, which may not typically fall within the skillset of professionals within traditional financial institutions. This complexity can act as a barrier for organizations looking to adopt tokenization. This is where tokenization platforms come into play. These platforms provide the necessary infrastructure and tools to issue, manage, and transfer compliant digital assets without the need for deep technical expertise in smart contract development.
The most notable example is Tokeny, which has specifically built solutions around the ERC-3643 standard. Tokeny offers a comprehensive solutions platform designed to simplify the tokenization process, integrating compliance mechanisms directly into the token lifecycle.
Tokeny’s infrastructure supports the full lifecycle for tokenizing financial instruments, from onboarding investors to permissioned secondary market trading, all within a compliant framework. Its platform simplifies regulatory compliance through automated investor verification, real-time compliance updates, and robust reporting tools for regulatory bodies. With a user-friendly interface and modular architecture, Tokeny enables financial institutions, asset managers, and corporations to customize their tokenization processes to meet specific regulatory requirements across different jurisdictions.
Case Studies
Among prominent case studies is ABN AMRO’s, a leading Dutch bank, issuance of the first tokenized green bond using ERC-3643 on the Tokeny platform (September, 2023). ABN AMRO ensured compliance with regulatory standards while benefiting from blockchain’s transparency and efficiency. The bond facilitated sustainable investments, demonstrating how traditional financial instruments can be innovatively managed on blockchain. Recently (February, 2025), ABN AMRO announced they had also successfully conducted an on-chain trade of tokenized securities against an E-Money Token using permissioned blockchain exchange 21X.
Another remarkable development is APEX Group’s strategic investment in Tokeny Solutions. The global financial services provider acquiring a 25% stake is a clear signal that traditional financial markets are moving beyond small tokenization experiments. This collaboration focuses on delivering end-to-end solutions for the issuing, transferring, managing, and reporting of tokenized securities.
With the backing of many large investors, law- and consultancy firms and a growing number of use cases and interest, at the time of writing the ERC-3643 token standard has amounted to nearly $30 billion worth of traditional financial assets issued on public blockchains. Among these are a $5 billion tokenized gold fund, several financial institutions issuing a tokenized Money Market Fund, a German tokenized syndicated loan for real estate, a tokenized venture capital fund, and tokenized corporate bonds.
Future Outlook
As the financial industry continues to evolve and tokenization grows from a small experiment to the necessary next step in this evolution, ERC-3643 is well-positioned to be at the forefront of this transition. By offering solutions that leverage the advantages of blockchain technology and the leading blockchain networks, combined with a robust integrated risk and compliance framework embedded in its code, tokenization has the potential to bridge traditional finance and blockchain networks.
We can expect to see more traditional financial institutions embracing tokenization to simultaneously improve operational efficiency, enhance transparency, automate regulatory compliance, and reduce costs. Additionally, the development of interoperable tokenization platforms may facilitate seamless transactions across different blockchains and jurisdictions, fostering a truly global digital asset ecosystem.
Conclusion
In conclusion, ERC-3643 represents a significant advancement in the tokenization of real-world assets, bridging the gap between traditional finance and blockchain technology. By embedding compliance mechanisms directly into smart contracts, ERC-3643 ensures regulatory adherence while unlocking the benefits of blockchain, such as transparency, efficiency, and security.
The growing adoption of ERC-3643, as evidenced by high-profile case studies and substantial asset tokenization volumes, highlights its effectiveness and versatility. As the financial landscape continues to shift towards digitalization, ERC-3643 will play a pivotal role in shaping the future of finance, enabling secure, compliant, and efficient management of digital assets on a global scale.
