Understanding Tokenization Standards
Why Standards Matter in a $16T+ Tokenization Opportunity
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Tokenization - the process of converting real-world assets (RWAs) into digital tokens on blockchain networks - is rapidly redefining how value is transferred and owned.
By automating manual processes, reducing transaction costs, and dramatically improving liquidity, tokenization is not just a technical evolution - it’s laying the groundwork for a more inclusive, efficient financial system.
But to scale across global markets, tokenization must overcome its biggest hurdles: standardization and interoperability.
Why Standards Matter in a $16T+ Tokenization Opportunity
According to reports from institutions like Citi and BCG, the total market for tokenized real-world assets could exceed $16 trillion by 2030. But without unified token standards and regulatory alignment, adoption remains fragmented.
Current challenges include:
Lack of cross-chain compatibility
Jurisdiction-specific compliance limitations
Fragmented identity, KYC, and permissioning layers
This is why token standards - shared rules that define how digital assets behave - are so essential. They provide the foundation for token interoperability, compliance, and composability across applications, blockchains, and regulatory zones.
Key Tokenization Standards to Know
Here’s a breakdown of the most prominent token standards driving the tokenization of assets:
➟ ERC-20: Fungible Token Standard (Ethereum)
The most widely used standard, defining how identical, interchangeable tokens behave. It powers the majority of stablecoins and DeFi tokens on Ethereum and EVM-compatible chains.
➟ ERC-721: Non-Fungible Token (NFT) Standard
Introduced in 2018, ERC-721 enables the representation of unique assets like digital art, collectibles, or identity credentials - where no two tokens are alike.
➟ ERC-1155: Multi-Token Standard
A hybrid standard allowing a single contract to manage both fungible and non-fungible tokens. Highly useful in gaming and asset-heavy platforms where efficient resource management matters.
Standards Focused on Compliance and Real-World Assets (RWAs)
➟ ERC-1400: Security Token Standard
Designed for regulated financial instruments (e.g. equities, bonds). Incorporates features for transfer restrictions, identity verification, and compliance across multiple jurisdictions.
➟ ERC-3643 (T-REX): Compliance-Aware Security Token
Optimized for compliance-driven industries. Tokens are embedded with access control logic, ensuring only verified participants can hold or transfer them. Widely adopted for real estate, equity, and fund tokenization.
➟ CMTAT: Swiss-Compliant Securities Tokenization
Developed by the Capital Markets and Technology Association (CMTA), CMTAT is tailored to Swiss law and widely used by Swiss financial institutions for compliant tokenization of shares and bonds.
➟ ERC-1450: SEC-Compliant Security Token (U.S.)
Proposed by StartEngine, this standard enables the creation of digital stock certificates in compliance with U.S. SEC regulations. A foundational step for making securities issuance efficient and programmable.
➟ ERC-2980: Swiss-Compliant Asset Token
Introduced in response to FINMA guidance, this standard enables the compliant representation of Swiss-style assets like shares, bonds, or derivatives as digital tokens on Ethereum.
➟ ERC-7518: DyCIST Protocol (Emerging)
An advanced proposal that extends ERC-1155 to represent semi-fungible, regulated financial instruments. It introduces partitions to encode rights and restrictions - critical for structured asset management.
The Road Ahead: Interoperability, Regulation, and Scale
To unlock tokenization’s full promise, the industry must align on two fronts:
Technology interoperability: Tokens should work seamlessly across blockchains (via standards and bridges).
Regulatory harmonization: Compliance logic must be programmable, jurisdiction-aware, and enforced on-chain.
The convergence of DeFi infrastructure, RWA tokenization, and compliant digital identity is already reshaping global finance - from on-chain student loans (e.g., Pencil Finance) to tokenized treasuries, real estate, and private equity.
Tokenization Standards: Bridging the Gap to Institutional Adoption
Tokenization's Transformative Potential
Tokenization enables fractional ownership, making previously illiquid assets—such as real estate, private equity, and regulated securities—more accessible. By leveraging smart contracts, tokenized assets can be traded efficiently, settled faster, and automated for compliance. This shift reduces reliance on intermediaries, lowers costs, and enhances liquidity in traditionally rigid financial markets.
Regulatory Landscape: Challenges and Opportunities
While MiCAR (Markets in Crypto-Assets Regulation) provides a structured regulatory framework for crypto assets in the EU, it does not cover tokenized financial instruments. Instead, these assets fall under MiFID II (Markets in Financial Instruments Directive II), a broader financial regulation designed to enhance market transparency, investor protection, and compliance standards.
This regulatory split creates complexity and leads to a fragmented compliance landscape across jurisdictions. While regulatory clarity will unlock institutional adoption, the lack of global standardization continues to pose challenges for financial institutions looking to expand tokenization initiatives.
Importance of Robust Token Standards
Ethereum token standards dominate the tokenization space, particularly ERC-20, which underpins most fungible token transactions. However, traditional ERC-20 tokens lack built-in compliance features, making them unsuitable for regulated financial markets.
To address this, standards like ERC-1400 and ERC-3643 have been developed:
ERC-1400: Designed for security tokens, integrating KYC (Know Your Customer), AML (Anti-Money Laundering), and transfer restrictions to meet regulatory requirements.
ERC-3643: A compliance-focused token standard that embeds identity management and regulatory controls into each transaction, ensuring only verified participants can trade tokenized assets.
Additionally, CMTAT is a Swiss-aligned token standard that adheres to Swiss financial regulations but requires adaptation for broader global adoption.
Moving Forward: Collaboration is Key
To realize tokenization’s full potential, regulators, issuers, and technology providers must collaborate to establish scalable, compliant token standards. Interoperability and regulatory harmonization will be the key drivers of institutional adoption, ensuring that tokenized financial markets operate within a secure, efficient, and compliant framework.
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Closing Thoughts
Tokenization is more than a buzzword - it’s the foundation of a new financial paradigm. One where assets become accessible, markets become inclusive, and trust becomes programmable.
But it won’t scale through innovation alone. It needs bridges, not silos - built on interoperable standards and regulatory alignment.
The future of finance isn’t just digital. It’s tokenized.
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