Written by: Beosin

In the process of integrating blockchain technology with traditional financial markets, RWA has become one of the most transformative innovation areas. However, due to the lack of regulatory compliance frameworks and industry standards, the tokenization of real-world assets (RWA) has long faced developmental bottlenecks. Against this backdrop, the ERC-3643 standard has emerged as the first Ethereum token standard specifically designed for regulated assets.

Unlike the general 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 contradiction of traditional financial assets on-chain. In this article, 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 Specifications

ERC-3643 addresses the core needs of compliant 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 compliance contracts, which allows for flexible adjustment of compliance rules according to jurisdictional requirements without changing 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 employs a dual-layer permission control, inheriting the functionalities of ERC-20 while adding two key compliance layers. The first layer focuses on the identity and qualification verification of the transaction recipient, utilizing the 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 token itself, such as setting daily transfer limits and maximum holder counts. This layered design ensures continuous verification of investor qualifications while providing issuers with flexible tools for regulatory rule enforcement, meeting the multidimensional 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 all token holders' identities 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 check declaration types) and the Trusted Issuers Registry (to check declaration issuers) when called, returning true if passed.

• Compliance Interface: A dynamic compliance rules engine used to execute global compliance strategies (such as holder limits and 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, allowing issuers to dynamically upgrade rules (such as adding AML strategies) without affecting the token contract.

• Trusted Issuers Registry: Used to manage trusted entities authorized to issue declarations.

• Token Contract: Expands compliance control functions on the basis of ERC-20 compatibility, with main functions including conditional transfers, token freezing and unfreezing, contract lifecycle control, and token metadata management.

• Claim Topics Registry: Defines the types of declarations required for the token (such as KYC levels and investor qualifications), serving as a "checklist" for identity verification.

2. Identity Verification and Compliance Execution Mechanism

The identity verification mechanism requires that each token holder must 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 in the Claim Topics Registry, and these declarations must be signed by authorized parties 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 to perform the following key checks:

• Investor qualification match: Verifying whether the recipient meets the investor requirements for the specific asset class (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 cause a single investor to exceed 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 executed on-chain controls. These rules are dynamically upgradable through compliance contract updates, without needing to modify the token contract itself, to adapt to the continuously improving compliance framework.

Taking the Hong Kong Monetary Authority (HKMA) stablecoin regulatory regime, which will be implemented starting August 2025, as an example, ERC-3643 can meet the following regulatory requirements:

i) Identity verification of stablecoin holders

Section 6.5.3 of the "Guidelines for Regulated Activities of Licensed Stablecoin Issuers": Licensees should identify all operations related to each specified stablecoin throughout its entire token lifecycle, including deployment, configuration, minting, burning, upgrading, pausing, resuming, blacklisting, unblacklisting, freezing, unfreezing, whitelisting, and the use of any operational wallets.

Section 5.11 of the "Guidelines for Combating Money Laundering and Terrorist Financing": Unless the licensee can demonstrate to the Monetary Authority that such risk mitigation measures effectively prevent and combat money laundering and terrorist financing activities and other crimes, the identity of each stablecoin holder should 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.

These two guidelines require stablecoin licensees to verify the identities of stablecoin holders and manage permissions for all operations throughout the token lifecycle. ERC-3643 supports binding each stablecoin holder's wallet address with on-chain identity declarations (such as KYC status and residence) and verifies them in real-time through the Compliance contract.

ii) Transaction control and real-time screening

Section 5.10 of the "Guidelines for Combating Money Laundering and Terrorist Financing": Licensees may implement various measures to mitigate the risk of stablecoins being used for illegal activities. Examples of such measures include:

(a) Adopting appropriate technological solutions (such as blockchain analysis tools) to continuously screen stablecoin transactions and related wallet addresses beyond the initial distribution scope;

(b) Blacklisting identified wallet addresses associated with sanctions or illegal activities;

And section 6.36: (a) Adopting a risk-based approach to monitor stablecoin transfers conducted with counterparties…; and (b) Regularly and/or upon triggering events, reviewing any greater risks of money laundering and terrorist financing based on the information obtained from due diligence measures taken regarding stablecoin transfer counterparties as per section 6.33…

The Compliance contract of ERC-3643 supports self-defined transaction rules (such as 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.

For addresses receiving funds through cross-chain or token exchange transactions, Beosin KYT supports the identification of over 120 cross-chain protocols and token exchange protocols and provides professional API integration solutions to enhance ERC-3643's risk assessment capabilities for transaction addresses across the entire chain.

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. At the operational level, ERC-3643 provides regulatory authorities with 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 by issuers. This transparency not only reduces regulatory costs but also enhances market integrity, laying the foundation for tokenized assets to gain mainstream recognition.

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