Written by: Beosin
In the process of integrating blockchain technology with traditional financial markets, Real-World Assets (RWA) have become one of the most transformative innovation areas. However, limited by the lack of regulatory compliance frameworks and industry standards, the tokenization of real-world assets (RWA) has long faced developmental bottlenecks. In this context, the ERC-3643 standard has emerged as the first Ethereum token standard specifically designed for regulated assets.
Unlike the generic ERC-20 standard, ERC-3643 constructs a technical architecture that complies with securities regulations while retaining the efficiency advantages of blockchain through embedded identity verification and automated compliance engines, addressing the core contradictions of traditional financial assets on-chain. This article by the Beosin security team will analyze the ERC-3643 token standard, compliance features, and application scenarios.
Analysis of the ERC-3643 Token Standard
1. Token Specification
ERC-3643 addresses the core needs of compliance asset tokenization through a modular architecture. This decoupled design achieves high configurability of the system. The most critical aspect is the separation of the identity registry and the compliance contract, allowing flexible adjustments to compliance rules according to jurisdictional requirements without altering the core logic of the token. When a user initiates a transfer, the token contract automatically queries the compliance contract, which cross-checks the identity declarations in the identity registry, forming an automated compliance decision chain.
The technical architecture of ERC-3643 adopts dual-level permission control, inheriting ERC-20 functionalities while adding two layers of key compliance layers. The first layer focuses on identity and qualification verification of the transaction recipient, utilizing ERC-734/735 standards to verify the existence of identity declarations and the certification status of trusted issuers; the second layer imposes global rule constraints on the tokens themselves, such as setting daily transfer limits and caps on the number of holders. This layered design ensures continuous verification of investor qualifications while providing issuers with flexible tools for regulatory rule enforcement to meet the multi-dimensional compliance needs of security tokens. The core components of its architecture are as follows:
Identity Registry: As the core module connecting on-chain addresses with on-chain identities (ONCHAINID), it ensures that the identities of all token holders are verifiable and compliant. Its core functions include registerIdentity(), updateIdentity(), updateCountry(), batchRegisterIdentity(), and isVerified(). The verification function isVerified() interacts with the Claim Topics Registry (to verify claim types) and the Trusted Issuers Registry (to verify claim issuers) when called, returning true if successful.
Compliance Interface: A dynamic compliance rule engine used to enforce global compliance strategies (such as holder limits, cross-border restrictions), associated with the token contract and intercepting illegal transactions in real-time. Its core functions include bindToken(), unbindToken(), transferred(), created(), destroyed(), and canTransfer(), supporting modular replacement of compliance logic so that issuers can dynamically upgrade rules (such as adding new AML strategies) without affecting the token contract.
Trusted Issuers Registry: Used to manage trusted entities authorized to issue declarations.
Token contract: Extends compliance control capabilities based on compatibility with ERC-20, with main functions including conditional transfers, token freezing and unfreezing, contract lifecycle control, and token metadata management.
Claim Topics Registry: Defines the types of claims required for tokens (such as KYC levels, investor qualifications) as a 'checklist' for verification.
2. Identity Verification and Compliance Execution Mechanism
The identity verification mechanism requires each token holder to complete identity verification through a trusted declaration issuer to be whitelisted in the identity registry. When a transfer occurs, the token contract calls the isVerified() function through the compliance contract before the transfer, checking in real-time whether the recipient address is in the identity registry, and whether its associated identity contract contains the declarations required by the Claim Topics Registry, with these declarations signed by authorized entities in the Trusted Issuers Registry. This process ensures that only qualified investors who have passed KYC/AML checks can hold or receive security tokens.
Compliance execution is achieved through the canTransfer() function, which is called before each transfer and performs the following key checks:
Investor Qualification Matching: Verifying whether the recipient meets the investor requirements for specific asset classes (such as qualified investor status)
Jurisdictional Restrictions: Ensuring that the jurisdictions of both parties allow such transactions
Holding Limit Control: Checking whether the transfer would result in a single investor exceeding the holding limit
Global Rule Compliance: Verifying compliance with other global rules set by the issuer or regulatory authorities
This design embeds compliance requirements directly into the token's contract, transforming regulatory rules into automatically executable on-chain controls. These rules are dynamically upgradable through compliance contract updates, without modifying the token contract itself, to adapt to the continually improving compliance framework.
Taking the stablecoin regulatory system implemented by the Hong Kong Monetary Authority (HKMA) starting August 2025 as an example, ERC-3643 can meet the regulatory requirements of the following regulations:
i) Identity verification of stablecoin holders
Guidelines for Regulated Stablecoin Issuers, Article 6.5.3: Licensees should identify all operations related to each specified stablecoin throughout the entire token lifecycle, which should cover deployment, configuration, minting, burning, upgrading, pausing, resuming, blacklisting, unblacklisting, freezing, unfreezing, whitelisting, and the use of any operational wallets.
Guidelines for Combating Money Laundering and Terrorist Financing, Article 5.11: Unless the licensee can demonstrate to the Monetary Authority that such risk mitigation measures can effectively prevent and combat money laundering and terrorist financing activities and other crimes, the identity of each stablecoin holder must be verified by one of the following parties: the licensee (even if the holder has no client relationship with the licensee); a properly regulated financial institution or virtual asset service provider; or a reliable third party.
The above two guidelines require stablecoin licensees to verify the identity of stablecoin holders and manage the permissions for all operations in the token lifecycle. ERC-3643 supports binding each stablecoin holder's wallet address with on-chain identity declarations (such as KYC status, residence) and verifies them in real-time through the Compliance contract.
ii) Transaction control and real-time screening
Guidelines for Combating Money Laundering and Terrorist Financing, Article 5.10: Licensees may implement various measures to prevent the risk of stablecoins being used for illegal activities. Examples of such measures include:
(a) Adopt appropriate technological solutions (such as blockchain analysis tools) to continuously screen stablecoin transactions and related wallet addresses beyond the initial distribution range;
(b) Wallet addresses identified as related to sanctions or illegal activities should be blacklisted;
And Article 6.36: (a) adopt a risk-based approach to monitor stablecoin transfers conducted with stablecoin transfer counterparties...; and (b) regularly and/or upon the occurrence of triggering events, review the information obtained from due diligence measures taken concerning stablecoin transfer counterparties as per Article 6.33...
The Compliance contract of ERC-3643 supports customized transaction rules (e.g., allowing transfers only between KYC addresses) and dynamically updates whitelists and blacklists. If the recipient has not passed KYC or is on the blacklist, the transaction is automatically terminated.
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Conclusion
The core competitiveness of ERC-3643 lies in directly encoding regulatory requirements into the token protocol layer, providing a secure bridge for traditional finance to enter the blockchain world. This design addresses the compliance issues most concerning traditional financial institutions, including investor certification, jurisdictional restrictions, and transaction monitoring. On an operational level, ERC-3643 offers regulators unprecedented transparent supervisory capabilities. All identity verification records and compliance decisions are stored on-chain in a verifiable manner, allowing regulators direct access without relying on post-reporting from issuers. This transparency not only reduces regulatory costs but also enhances market integrity, laying the foundation for tokenized assets to gain mainstream recognition.