Ethereum adopts ERC-3643 as the First Tokenization Standard

The Ethereum community has officially endorsed the ERC-3643 Ethereum Improvement Proposal (EIP) as a standardized framework for the compliant tokenization of real-world assets (RWAs). As of December 15, the proposal has successfully undergone a thorough review, discussion, and consensus-building process within the Ethereum community, mirroring the establishment of previous standards like ERC-20.

Introduced in 2021, ERC-3643 addresses the tokenization of securities, RWAs, payment systems, and loyalty programs. The proposal introduces a self-sovereign identity (SSI) framework, utilizing anonymous yet verifiable credentials to verify users' eligibility for a token. This innovative approach adds an additional layer of security and compliance to the tokenization process.

Built on top of the ERC-20 standard, ERC-3643 incorporates two distinct permission layers to bolster security and regulatory adherence. The first layer focuses on the identity and eligibility of the transaction's recipient, employing ERC-734/-735 standards to validate the presence of necessary claims on the identity, authenticated by trusted claim issuers. The second layer imposes global restrictions on the token itself, including limits on daily token volume and the maximum number of token holders, thereby ensuring controlled and regulated token circulation.

Asset tokenization involves converting the value of physical or digital assets into digital tokens on a blockchain or distributed ledger. This process offers numerous advantages, including increased liquidity, faster settlements, transparency, and broader market accessibility. Real-world applications encompass fractional trading of assets such as real estate, art, financial assets, and intellectual property.

According to estimates from management consulting firm Roland Berger, the asset tokenization market is projected to reach a substantial $10 trillion by 2030, representing a significant surge from its current value of approximately $300 billion. This trend has garnered attention from both traditional financial institutions and crypto-native companies. Industry leaders such as JPMorgan, Goldman Sachs, and Societe Generale are actively exploring asset tokenization technology, recognizing its potential to transform finance.

Data from VanEck Research indicates that the total market capitalization for RWAs reached $342 billion in September, underscoring the resilience and growth of asset tokenization despite challenges within the broader crypto industry.