ERC-3643: The Case for Permissioned Tokens for Insitutional Adoption

Transcript

It should not be my app, it where everything's permissioned or not perm- You need to have trust, but you should have consent into knowing what you're buying. So, if you buy a tokenized money market fund, are you actually on the share registry of that money market fund, or did they put a money market fund into an offshore vehicle, and then took you in tokens, and you don't have a direct obligation for that? >> Welcome everyone to the Convert Podcast at The Defiant, where today here with Dennis O'Connell. He's the president and director of the ERC-3643 Association. Great to have you here on the show.

>> Thank you, family, Christopher. It's a pleasure to be here. >> Absolutely. Well, you're somebody who's been in the space for quite a number of years already. You come from a traditional finance background. Can you please tell me how you end up being becoming the president of the ERC-3643 Association, and what other hats do you wear? >> Oh, what a great question. Thank you very much for having me, Chris. So, yeah, I come from mechanical aerospace engineering background. I actually had the pleasure to work at NASA Langley for a few years before moving to nearly a decade-long career in derivatives trading in Chicago. I worked a couple FCMs, worked in agricultural commodities, all sorts of low latency derivatives trading. I thought that was going to be my career path, and in 2013,

Andre Antonopoulos, I believe is his name is, called Chicago February night, myself and a bunch of people from DRW and Citadel, my buddies who work there. We all went in, and we were just blown away about Bitcoin, and I thought, "Oh, wow, this is really cool. It's 2013, so you know, a nice hobby, but you know, I'll go back to my my regular day job." And from then on, experimented with ASICs and other things. And then, I consider myself like, you know, different generations, like almost a 2017 generation. Once Ethereum kind of came out, I saw Solidity, started playing around with it, and you know, the the astronomic rise of of Ethereum and smart contract languages. Um but I still was working in trad fi at the time and I ultimately moved over to Merrill Lynch. I was the global architect for Delta One and stock loan here in New

York. I had quite a big responsibility, big budget that I had to run a global team. And I had the privilege of actually doing my first blockchain project with R3 Corda back in the day on a stock loan use case, which was really great and I ended up winning an award for it for Bank of America, which was really cool. And then from basically 2018 onwards, my major career was effectively dominated with blockchain projects, which seems early nowadays, you know, but at the time I was still doing dual mandate where I had my regular work to do and I would sneak in blockchain projects here and there. And I then moved over to Bank of New York Mellon and I worked in clearance and collateral on the 360 team with an amazing mentor, Souther Patnik and Vikram, who were just great mentors to me. And that was a very special team. It

was a machine learning and blockchain team. And it was, you know, 90 parts machine learning, one part blockchain. I ended up working over 40 different blockchain projects. I actually went back and wrote all the projects I worked on while I was Finality, Grayscale Trust, USCC, HQLAX. It was just amazing time and you know, Bank of New York Mellon had so many opportunities and as you were talking about, we had a couple DeFi protocols, you know, come in and and and talk to the bank. And one of them was Uniswap and Hayden doesn't know this and I don't know him, but he did a you know, presentation about Uniswap to one of my colleagues. And working in collateral at the time, I go, "No, no, no, this is this is game changing for us this DeFi protocol." And the next day I left for or you know, not the next day,

but you know, the next few months I left for Securrency under Dan Doney, who was a a brilliant genius mind. And I worked at Securrency for a period of time and gets me to my first hat, which is, you know, Securrency was then purchased by DTCC. I now work for DTCC. So I'm advisor to DTCC. And the second hat along the way to your main question was, you know, how did I get started with the association? So, along the way, when Securrency was purchased by DCCC, myself and a private equity company called PSG, bought one of the subsidiaries out of Securrency, and I decided to take on that business, and I had the opportunity to do that. And since then, we've grown PSG and Paragon. We have about 50 employees globally, five businesses

worldwide in New York, Cayman, London, Abu Dhabi, and Hong Kong. And we have about 10 billion in assets that we can tokenize across clients. So, we've grown quite a business, and that was always an interesting hat being a CTO and partner of that of that business, and that's effectively my main day job. And so, we were talking to, you know, challenges with that business distribution. And then, along the way, when I met with Luke Flampton and Daniel Coheer of Tokeny, Luke, and I believe 2022-23, approached me about the idea of doing a nonprofit, Luxembourg nonprofit, around the standard. And I was like, the standard, I love what it espoused, I thought it was great, and I said I

agreed to do it. And so, Luke and I, with Alvaro, who's our other director, the three of us embarked on on building the standard. We have 15 founding members, who were all great, and and that's how we started the association, and as I said, that's where that's where the story begins. >> Right. Well, the the the standard has a long time in in the making, and in in some ways it precedes this recent, you know, like frenzy around tokenization that everybody's, you know, like getting on board with today. Just so everyone is on the same page, can you briefly state what the standard is about? It's called like the permission token standard. What is it? What does it do?

>> Yeah, it's a great question. At the end at the end of the day, it deals around control of a token of a token ledger. That's the species of standard that we consider it. ERC-3643 comes from a long canon of token standards. I think the most important one was in December of 2024, it reached EIP final status. So, it became a full bonafide Ethereum process that was really led by Ashoka and Adam and a whole a whole team there on the technical side of token. And uh actually had a nickname called T-Rex, which is an acronym for tokenized for regulated exchange. And now T-Rex is something whole new which we'll get into. So, the idea was, can we build something that meets the stringent requirements of the regulators? And the

way I look at it is like a whole spectrum of solutions. And ERC 3643 espoused to be the technology that that tried the hardest, went the hardest institutionally. Saying that we can meet all your requirements across different dimensions so that you can have the control you need around that that token for whatever your your context is. So, we call that species permission token. Its core functionality is to create a framework around control for the token itself and and the activities around it. >> So, this standard basically enables who the the issuer, the platform that is trading the the token, the the people who are building on top of it, who benefits or both who benefits and who

actually controls? >> I think it's important to say that's a it's a self-custodial solution. It's not a custodial solution and there are different ways to solve the same problem. And I think it's important that I say on the onset that I don't believe in my open standards. Believe in open standards. There are different ways to solve the same problem. Standards never really solve what I call like the technical apex optimization, which is like everyone's going to have a different opinion on how to solve a particular problem. But the key thing that we've learned with ERC 20, 7 21, 1155 is that this is a good enough way, a reference way to solve a problem that you then can build on top of, right?

3643 or ERC 3643 solves a problem in in four critical ways. It solves it on identity, it sells it on cryptographic proofs, it sells it on dynamic compliance rules, and sells around token control. So, our friends in DeFi would not like ERC-3643 because of things like clawback, because of things that require on-chain ID. And my view is that's completely okay because it's about consent, right? The other thing you mentioned is the issuer, right? So, 3643 is actually agnostic to any context. You could use it for a DAO, you could use it for an NFT, you could use it for whatever. Where it's found its home is in a new term I've been using uh called digital securities and permission

tokens. So, digital securities permission RWAs, excuse me. So, what do I mean when I say that? For example, most stablecoins are ERC-20. Why? Because they don't need that level of control. Many times a custodial version of an RWA or as an offshore ADR, again, does not necessarily need the heavy lifting of an ERC-3643 because in that solution, the main control location is in the custodial solution. How the transactions are done, how the tokens are minted, that sort of thing, it's in a centralized location. With ERC-3643, we are on-chain maximalist. We believe the entire kit should be on-chain fully.

And in order to accomplish that, you need some kind of, you know, big big infrastructure big pieces to do so. And that really begins with like the on-chain ID. Like everyone who interacts with it is an on-chain ID. So, you could use a use case in private securities, you could use a case with private permission stablecoins, or yielding stablecoins. We have use cases obviously in in digital securities, treasuries, all that sort of stuff. Uh but the main common thread is everything's on-chain. You could use any wallet technology you want MPC multi-sig hot cold whatever. It doesn't matter because the smart contract architecture is the main control plane around that.

>> So, to make the the parallel with traditional finance, so what I gather the standard does is that it creates additional methods and additional like message fields that would allow allow you to know more about who's holding the token and then to exercise some type of actions from a centralized party >> Yeah. >> different from the holder. So, can you walk me through how what this looks like in practice? Let's say I am I'm a bank and thinking about issuing my own stable coin for for instance or tokenized deposit and I'm thinking I'm looking you know I have my open list of >> Love all the open standards and all the

guys. Shout out to Jonathan I love them. >> And I'm going to start deploying and I see okay I have these two options. Can you walk me through the difference through it the life cycle of >> Yeah, so I I think this is a great thing. So, with 40 association we have over 160 members and we actually have 12 concurrent working groups. One of the working groups is led by Alvaro and Spain or ISO because there actually is not a classic parallel to what ERC-3643 does in the traditional finance. So, when you think about it every intermediary whether it's your exchange, custodian depository broker-dealer whatever all has a securities they have like a database, right? The way that database tables and data is arranged and

the way it's manipulated is unique. What is standardized in finance is the communication layers. >> Right. >> Right, your ISO, your Swift, your Fix. Those So, blockchain I tell people takes three steps and boils it down to one step. In finance or in anything it's I get I instruct you, you do whatever the instruction is and then I have to check and reconcile, right? In blockchain those three steps become one atomic step which is I update everyone sees. So, ERC-3643 does not have any analog in the old world because the the forcing function is that all of us have to share the same ledger. So, we have to represent the ledger unit of account in the same way.

We have to agree on how that's manipulated. And that's where like you get into the art versus the science. So, the standard has value in the sense that becomes a starting point or a common denominator for many of these institutions that either don't want to go with a partner and want to build their own or want to adopt a partner or whatever as they okay, we are not a standard, we know what it's it has this common set framework of of capabilities. Some of these members will build their own, you know, capabilities and get into that a little bit or build on top of it. But then the core reason for these different things like just like ERC-20, what made ERC-20 brilliant is you have the same five functions representing a token, right? You have a token, transfer, transfer from, allow, that sort of thing, right? Then ERC-4 I think

777 came on and people like oh mint and burn, right? So, it was an evolution to it, but the core concept was we all share the same viewpoints, we all have to agree how these tokens are manipulated. When the regulators and a lot of these licensed institutions looked at ERC-20, they go oh no, no, no, that's not enough on chain for us to feel good. And it really kind of took a few different paths. There was the 1400 set of implementations which is live and well, you know, 1400 is actually around six or seven unique implementations 1404, 1407. And but they never really were finalized into an EIP standard where they're used. And then ERC-20 permissioned where people took effectively ERC-20 and 777 and plused it up to have some sort of layers. Though

that was that ERC-20 principles considered to be like a lightweight approach. So, when I look at the full spectrum, ERC-3643 is on the most advanced, right? So, what I mean by that? So, you talk about like a use case. And let's use a private asset use case just cuz it's easy for me to talk through, right? So, first of all, whether you're the issue of the asset, the administrator that takes care of it, any investor holding it, whatever, any actor has to have an on chain ID or centralized identity. One thing I tell people about ERC-3643, that was an unintended consequence because, you know, I remember ID2020 and all these like Evernyms and all these older like decentralized identity >> Right.

>> kind of initiatives. One happy accident about ERC-3643 is we actually bootstrapped one of the largest decentralized identities, On-Chain ID. It's a weird relationship in the sense that it is and it isn't a part of the standard. So, everyone has an On-Chain ID and that that solves the most critical problem for regulators, which is the off-to-on-chain connectivity, purely, you know, custodial-less format, right? In a wallet format. >> And so, how do I get an On-Chain ID? Does it travel with me as I interface with different tokens under the same standard? And what does it tell the issuer or the platform about myself?

>> So, all great questions. Generally speaking, you're given an On-Chain ID. In this case, you have two sets. You have the ability to do a qualification. So, am I am I my capacity and my organization's capacity KYC, KYB? Am I fit for purpose to actually hold this asset, right? Through that process, you then get a On-Chain ID. The actual administrator of the token, 3643, will assign you a On-Chain ID. >> Okay. >> So, you'll you'll receive one in that pursuit. >> Perfect. Perfect. It's like a superior alternative to white lists and >> Absolutely, yes.

>> That's that's the idea, like >> Yeah. >> Because today when you see things like tokenized bonds or money market funds, typically when they're issued on permissionless or like open public blockchains, you know, a lot like white lists, allow lists, that's the way it's done. So, >> Right, because the main identity axiom is the wallet address. >> Okay. >> And that's a very dangerous thing because a private keys can be spoiled, wallet addresses are user nightmare, and wallet addresses can hold other assets, right? As we recently saw what happens when you have a bunch of smart people building all these indexers, you can look at the wallet address. So, it removes Ethereum unit of account of EOA, I think it's the term acronym, moves that as a primary identity into a smart contract base on chain ID. And there's

three immediate benefits from that. First of all, you could have multiple wallet addresses and multiple cryptographic claims. Number two, you could wrap more advanced technologies like privacy wrapping technologies around that. And number three, it orchestrates much more sophisticated uh recovery mechanism. So we can migrate and recover tokens. So God forbid that you lose your wallet, it's not a catastrophic event. People are like, "Oh, well, on chain ID, that seems like you know, a pain in the ass." It is, not going to lie. But you But my view is you're consenting because if you want to hold this on on the blockchain ledger, you need you need this and ultimately you want this. There's a difference between if I lose my license, I lose my citizenship, right? There's a famous article, right? Versus if I lose my wallet, I can go back to issue it and

re-receive all of my claims and and licenses and and permissions and that sort of thing. So on chain ID is absolutely fundamental, in fact, to the point where the token itself has an on chain ID. Identity has always been the key thing. Another thing you mentioned is you mentioned the concept of tokenized bonds and tokenized money market funds. This is such a thing I keep talking about to people is when you look at every product, how and what is tokenized? Because you got a versions of tokenized money market funds that are non-securities, right? That don't require this heavy overhead. So you go out and use a tokenized bond and I have an ERC-20 permission, why do I need ERC-3643? It's a totally valid question.

The reason for that is because a lot of abstraction has been done in a centralized capacity. And I want to say the word diminish, but to refine and reduce the level of complexity on the compliance side. So that you get a token. But there's a trade-off all of this. And this to me has always been one of the big dangers with blockchain is the instinct of blockchain for last 10 years was always to go offshore, do in a regulatory minimalistic capacity, right? And that has had massive benefits in liquidity composability efficiency innovation, right? ERC-20 is arguably massively successful because because of that innovation around it. But, the way different issuers and end product providers, and there's a whole skew of

them, and and there should be, they've all made different concessions on what you, the end buyer, is buying. And and actually Austin Campbell had a post about this. This is something I talk about all the time, which is we should absolutely have choice in DeFi. You shouldn't have the whole thing. It shouldn't be myopic, where everything's permissioned or not permitted. You need to have choice, but you should have consent into knowing what you're buying. So, if you buy a tokenized money market fund, are you actually on the share registry of that money market fund, or did they put a money market fund into an offshore vehicle, and then took you know, took tokens, and you don't have a direct obligation for that?

>> And going back to this idea of this issuer, who's now thinking about, you know, a regulated entity, they're already somewhat uncomfortable, you know, getting into the stablecoin route or whatever. So, how do we sell this to the compliance team within the organization? What will that allow them to do, and what sort of new risks does it create? And so, for example, one of the things that you can typically do in traditional finance is, you know, starting with not accepting an incoming Swift transaction >> That's right.

>> So, I will not deal with, you know, Russian, you know, banks and institutions or persons on the OFAC list. They will just not be a thing because I'll block them before they get within my perimeter. Then, I have the ability to reverse a transaction, which is, you know, one of the things that people really enjoy. >> Yes. >> And then, typically things like the equivalent of travel rules or KYC, etc., are then, you know, like off-chain. >> It's a lot. >> Yeah. So, how how does the the standard make my life easier in in those sense before we get to, you know, the end user?

>> Yeah, so so many good things in there. You know, first of all, I would say the the idea of a unwarranted transaction is not a bug, but a feature of blockchain, right? The ability to unilaterally push a transaction either at the coin level or an ERC-20 level, right? Because there's no control mechanism on that, you can't stop it. Now, you can blacklist a label. I know some of the MPC providers actually have a solution or they call them gray wallets, if you're familiar with that term. But, my view isn't to solve it with more off-chain tech. My view is to solve it with on-chain tech. If you want to enter into a a framework or paradigm where you don't get unsolicited transactions or you want, you know, more control, you

have to consent to giving to a trade-off of giving up more than when you join DeFi, right? So, in DeFi, the ability to be fully intermediary, you know, on demand, I could redeem whatever my tokens when I want, you forfeit the ability to have a clawback, right? >> Yeah. >> Whereas in ERC-3643, the four pillars that I go back to is we talked about on-chain ID. Right? This ability where you have smart contract base, where you have cryptographic claims, and you have multiple wallets assigned. Everyone, whether it's the administrators, the operators, the ambassadors, whoever, interacts with the token standard in that capacity. Sorry. The second thing is the identity registry. The identity registry effectively holds a library of claims that get very granular into what

level of KYC are you, and how do we verify that in a cryptographic sense? >> Yeah. >> So, whether it's you're KYC'd in a specific country or you have a politically exposed person or you're a creditor or qualified investor, that level of granularity is able to be done and able to be done in, you know, your choice of whether on-chain or off-chain claim and proof. The other great thing about 3643, which is a trade-off, is that it's actually not one smart contract, it's actually it's a complex of smart contracts. So, on-chain ID is its own smart contract. The identity registry is a set of smart contracts, about four smart contracts. And then you have the compliance modules, which can be, you know, anywhere from one to many smart contracts. Now, compliance module solves two, you know, two different

problems. People go, "Well, what's the difference?" Identity registry gets you into Disney World. Compliance modules tells you whether you're high enough to ride the ride. Right. So, they're two So, the registry concerns itself with the participants and their permissions. The compliance concerns itself with the contractual obligations of the asset or whether or not you're acting within that. Now, the big problem that that arises up with compliance is complexity of the rule set and freshness of the data. And one of our best integrations is with ACE from Chainlink, a compliance engine, which solves both of those use cases. And so, we see all types of compliance modules, whether it's number of transactions, particular country codes. Now, I think we'll get into transaction a little bit, so I'll I'll

I'll go granular there, but the fourth pillar is the control of the token itself. The token has over 120 controls around it. It's fundamentally ERC-20 that's been wrapped. And what that means is you have, you know, all the things you expect. You could pause the whole thing. You could freeze an individual account. You could freeze individual tokens if you want. You could perform the clawback. You could perform migration. The art of this is mapping those capabilities to things like corporate actions. So, for example, you go up to you're a credit investor and you're like, "Hey, I want to own this asset and I want to take it in tokenized form." You go to the administrator, you go through a qualification process, you pass that process, you're given an on chain ID. Then you go back, you go through a subscription process, you may

send stablecoin, fiat, whatever, and in that transaction you're going to then minted to your wallet and your on chain ID you're then minted your tokens that you have in ERC-3643. And you just look at them and then you're able to transact with them, but only to other qualified or registered investors. And we'll get into why that's a challenge and a and a a big challenge in a little bit. So, now you can you know rest easy that if your tokens are you know transferred incorrectly or you lose sight of them that the minister never lose line of sight of the tokens. And so clawback frustrates a lot of protocols because if an administrator is able to come in and got out you know all or 50% without the other consent you break composability right? Like you can't go with ERC-20s

and go into Ave and clawback stuff out. But with 3643 and 1400 other permission token standards like 7943 which is the newer ones you absolutely can that's a key tenant. So that's a key piece of frustration. So that's why I talk about it's it's a compromise of consent which is if you don't want to be in a paradigm where you don't get unsolicited tokens or you don't want to lose line of sight or something happens the trade-off there is that for someone to have administrative control. Now it's not centralized in the sense that it's off-chain it's fully on-chain control and it's modularized. Right. So >> So you basically know what you're getting into ex-ante versus what we see today. So let's talk about the the alternatives today. So and one one alternative when you have things like

the bDAO exploit would be hey let's go and say Circle like come do something block this wallet address you know make this transaction good for the people who have been you know robbed of their assets. But they have limited tool set and they have to react exposed right? So they're basically asking the question whether you want to intervene or not. My sense is that the standard introduces a way that you can prevent those things from happening in the first place because you sort of like define the the type of actors that >> Correct. And if you saw with the bDAO eventually clawback and eventually legals now become an issue. Like the original like panacea of DeFi which I am was a strong believer is that what happens in blockchain stays in

blockchain. And if you remember the biggest concern at the time was the ETH fork, right? You know, and that was a huge thing. But that was like the first loosely termed clawback or undo, let's call it, right? And those are done under the most exigent circumstances, right? It's It's a very serious thing because it comes into all sorts of things of like governance and decentralization and that sort of thing. The challenge is And again, it's not specific to ERC-3643, it's you know, what any any solution, you know, 3643 is the heaviest of these solutions. And then they come down and become more lightweight with ERC-20 permissions the most lightweight. But the main thing is you have to trade off in terms of your unilateral control over that token, right? So, if you don't like

what happened with KELP DAO, the reason why they were able to exploit it with the bridge and everything, you know, you know, with LayerZero, was because there was no governance mechanism to the extent that they needed it to either pause the bridging in time or clawback the tokens. Like they lose minus sight and then they were able to just, you know, shred them and send them all over the place. ERC-3643, we've never had those issues. Now, there is a distinction between what can be done at a smart contract layer and then what can be done at a protocol layer, right? And this is was to your earlier question. There's a limitation of ERC-3643 and any other token standard at the application layer because it is subservient to what can be done at the protocol layer. Now, in the KELP, you know, purpose of KELP DAO, that was a

clawback at the protocol layer, right? Which is it was an extremely big deal for them to do so. Clawback nonetheless to correct it and and recover the funds, which I believe was correct, but not without controversy, right? So, that's a challenge for DeFi. And again, I don't believe in myopic solution. There's different degradations of it. But you should know what you're getting into. Like if you're trading, if you're buying real world assets, which are non-cryptos, not all RWAs, like we talked about, either have the same rights or privileges as what existed in the original world. That's one layer of consent. And not all of them are tokenized the same way, right? Some of them are tokenized with ERC-20 permissions. Some of them are tokenized with 1400. Some of them are with ERC-3643. You have to know what you're getting into and what capabilities that

issuer has or administrators have around that token so that you're aware of what can and cannot happen. It's not good or bad, it just an is. Right? And so you could have the same treasury bond where you could use ERC-3643. Like, yeah, you want the actual treasuries? There you go. You do the full KYC, the whole shebang. You own the actual treasuries, good for you. And then you have different degradations where like, well, your treasury is an SPV and you're just getting tokens of it in your ERC-20. Okay, well, if I'm in a DeFi protocol and I'm getting yield on on treasuries and I feel good. I'm like, oh, it's tokenized treasuries. Haha, stupid 3643 guys, I didn't need half of that.

>> Right. >> Yes, we are stupid in the sense that it's over overly complex, but we're not stupid in the sense that when things go wrong, you wish you had that that level protection. Because once things go wrong in in another layer, you may not have the same level of protection. It's not no protection, but not the same level. So it's all a trade-off in in that capacity and I think that's where it's gotten much more complicated for people. When you go on action about it with tokenized stocks, RWAs, all this narrative, it's like, whoa. What is What is all this? Like, why isn't everything using ERC-3643? And And the reason is they're They're not all the same. So they don't have the same solution. And I think it's very important.

>> If I'm thinking going back to this project, this institution launching a tokenized security, whatever it is, and I think about the the the tech stack that I need to assemble, okay, you you you sold me on the idea of adopting for the for this token that I'm issuing. What else do I need and what might be missing? You already mentioned privacy, for example, a lot of this permission like chains, one of the key benefits that you have privacy, nobody wants to see, you know, their trades being >> That's right. >> out in in transparent for everyone to see. So, if you're building your ideal stack, what are you layering on top of the standard? What what What might be missing as well?

>> Yeah, it's great question. So, we're very blessed at the association to be a living breathing standard. So, first big area focus everyone is looking at on chain ID. >> Yeah. >> Either wrapping in privacy, enhancing it, integrating to much more sophisticated identity frameworks. So, we're seeing a big push on that. And number two, oracles. Oracle data. ERC-3643 is a very data hungry token standards in general are very data hungry. Sourcing a lot of integrations and projects with with different oracle providers writ and that also includes both non-privacy and privacy wrapped solutions. Another big thing is like corporate actions, right? So, you have a stock split or you have a dividend payment. We're seeing when we when we

reimagine the ERC-3643 in different languages, every time we've done that the corporate actions are handled slightly differently. >> Right. >> Whether as a convenience function, orchestration function, or whatever. So, you always have your same primitives, but to degree of which the convenience of okay, rather than doing like, you know, a mint for everybody, I could do like a batch mint. I have like a special like dividend that includes batch mint and a bunch of other things in there. So, we see a lot of playing around with with that. And then the big the next big thing is I is actually registration.

It's in the sense of like EINs, CUSIPs, ISINs. How do you tie the asset to that pricing? That's a big area of of improvement that we're also seeing. So, it's living and breathing. And then of course, we have our two major projects that were that were launched that will have launched ECC that we announced, which was the T-Rex ledger and Ascend, which I'll get into and so one solves the composability issue which you raised and the other solves the fragment and liquidity. >> And that's a good segue to talk about adoption and where is it at the moment and I I've I read about announcements coming live, you know, in next couple of years. So, what's the TVL under the the standard and what's going on?

>> Yeah, so this has been a very frustrating thing for me as president is it's about credibility. I see a lot of these great dashboards or you know, Adam at the other way XYZ team is fabulous and the Doom team has been fabulous. We just did our survey or census for for 2026 of the ERC 2643 and that was spurred because we had over 111 billion announced in April, which is an extremely high number. 100 billion with Apex coming in by 2027 at least and with Bridge Tower and that team doing the Doma X token on Avalanche with 11 billion. For many years when we started the work and the standard, majority of the assets were the token clients, which

were around 20 to 30 billion. We always had a challenge with the way token and relationship was to disclose those assets. The there was a nice project in 2025 last year with Qualit Qualitex, I think I'm saying their name right, that did the Dune dashboard that actually shows a bunch of projects. So, what I can say is it's very difficult because a lot of really great projects do not want to be disclosed, which is very frustrating for all of us because either is an NDA in reason, there's privacy reasons, they don't want to disclose the value. What I can say that I personally verified is now with Bridge Tower public and the and the assets that

I do know on chain across 28 different blockchains, we're just around 80 billion in assets on chain right now, which is incredibly insane number. The problem is a lot of them are latent, they're just sitting there, TVL not much composability. >> And and what are those are like tokenized liquid assets for instance or >> It's incredible how the diversity. They could be Dubai real estate, they could be Swiss bonds, they could be mineral and mining rights in Africa, in Europe, in North America, like Don X's in North America. They could be hydrogen sustainability, like with PSG, digital my company, do a lot of sustainable. Um they could be, you know, structure products and CLOs, and private equity and aviation leasing, and they could be

anything around uh SkyBridge, right, and the fund of funds. It It is truly diverse, and and we're seeing a lot more money market funds. Uh we we We were even involved with B&D Baribas shows the standard for their money market fund product. And then we also announced with World Liberty Fi the uh with Apex uh Apex with their permission stable coin for World Liberty Fi. So, it's it's literally anything and everything you can you can imagine that's out there. The The pipeline, which is always optimistic. So, from what we know with our internal numbers, we'll probably, if we're lucky, be around uh over 150, probably 200 billion by this time next year. The total pipeline, when I asked our when I asked for the survey, I said,

you know, "What is the maximum size of this asset if you were to fully bring on chain?" Which is always an optimistic number. So, I want to caveat that to your audience. But, to give you the idea of the firepower behind this, it was 7.9 trillion, which is a crazy number to come across all these different assets. So, it's like, "Oh, well, we tokenize this percentage in initial offering. We'll see if we get if we get more of a bite, we can go up to this number." So, that's what that number. So, that number will always be optimistic. I'm hoping that we get maybe 20% of that number in the next few years. But, if you're if you're hearing me, you're getting like the natural hockey stick of of these sort of assets that are that are coming writ large.

>> And considering you know, clarity, and bringing more clarity to a space, but in some ways replicating some of the structure of the centralized structures that we used to. What's your take and so like to wrap up on on on what you expect to see in the next 6 and 12 months, and how the industry will change, and will it be more towards permission but open standards versus closed ecosystems? >> It's going to be two worlds collide. So, the way I look at it is Austin ERC-3643 were part of the RWA tribe. We're sub-sect in RWA tribe. I mostly calls us digital securities mostly from, you know, being named in the innovation exemption with the SEC, being named by

Chairman Atkins, which I'm extremely grateful for. Chairman Michael Celie of CFTC has been very good to the standard and, you know, some of our members including them in their various SEC actions has been really, really positive for us. That kind of credibility that we have has feedback to the rest of the world where we were already strong in Europe, strong in in UAE and in the GCC and Middle East and very strong in Asia in terms of different adoptions. So, the frequency and conversation I'm having is very much increasing on that, which is a which is a great thing. But, for all the victories I say if all the victory that ERC-3643 has had in terms of regulatory wins, institutional adoption, you know, TVL, the challenge has always been the why. Why do you put this Why do you go

to the extent that you do to put this asset on chain? To what end is it? And where DeFi, they went a different route where they went to, you know, this minimalist regulatory approach for a whole bunch of very good reasons, some positive, some negative, and they were able to maximize liquidity, composability. You can do so many things with your ERC-20, but if you look at the DeFi numbers, it's sort of plateaued, it kind of spins. Things like, you know, pump fund and meme coins. Yeah, you have what I consider to be a weak asset class basis to put it lightly, right? Highly volatile, highly correlated to Bitcoin, that sort of deal. It's like really challenges, you know, and then you add

in like kind of the 50 criminal element, the fraud element, really challenges DeFi to grow because fundamentally where they've excelled with liquidity, the trade-off of not dealing with RWA has been that their the crypto tokens as a whole have suffered. That they are unsafe to say. So, the two worlds actually need each other and everyone knows this now. People didn't know this 9 months ago, but you know, we could see it because, you know, when you're facing, you know, clients and investors and they're like, well, tokenization sounds great, but why? And they're like, what am I getting? It comes down to word of utility, right? And underneath utility is incentive liquidity. And so, with the association and our members, we launched two major projects to deal with this problem. We launched T-REX Network,

which is backed by the Apex and Tokeny teams. And then we launched Ascend, which is backed by the PSD Digital team. They're sister projects and they solve two aspects. Ascend is the world's first on-chain triparty vault that we're building. It enables us to collateralize ERC-3643 and any other permission assets. We take the same heritage of ERC-3643 around identity, registry, compliance, and control and put it into a triparty model where the borrowers do not directly interact. Versus most of vaults like 4626 where they do. And there's a whole reasons why we do that.

The net effect of that is that by going through all the hardship with the actual bonafide share registry and asset on chain, really difficult for secondary trading. Very, very cumbersome because, you know, I think we want to go through this which was, what happens in a transaction, right? So, ERC-3643 transaction is quite complicated. When you do a transfer in an ERC-20 transaction, several checks have to be made. Are you in good standing? Am I in good standing? In other words, are accounts frozen? Do you have enough for the transfer as you would expect? Are your claim What claims do you need and are they valid? What claims do I need and are they valid? So, we have to go back to your identity registry through our on-chain IDs and do our cryptographic checks. Then we have to go through the compliance module and go through, you know, which rule do we

pass? This rule? This rule? Oh, we failed. Okay, revert. Pass, pass, pass, pass, whatever, how many rules. Again, that's complex. Then we actually do the transaction and then we do another look back on the compliance module post the transaction, you know, within the code block to say, "Okay, we moved the funds or moved the tokens, is everything still good, right?" And look back, yes, everything's still good, and then the events are emitted. So, that's a very gas-intensive sort of thing. You cannot do it with Uniswap. It's it's completely untenable. A lot of people in in the vault space were brilliant, they're like, "Well, you're a ERC-20 base, like we could just integrate you."

Functionally, you can, but you run into a bunch of problems. You run into contamination, I call it. Whereas, if we're now a digital security, a US registered security that we represent, and we put you into a DeFi protocol, and you are not a broker-dealer, >> Right. >> big problems, right? Number two, regulatory. If I pledge and you have direct interaction between the borrower and lender, and the lender gets half of their tokens clawed back, the borrower is completely naked with no recourse, whatever. And and worse yet, if when there is a liquidation, the liquidators then are saddled with the collateral that they then cannot deal with, right?

So, Ascend solves that issue, but it is also enables holders of these assets who've gone through that terrible process of qualifying and everything, but the benefit is ownership. But the the also benefit is that on chain, I could see the actual asset. So, in other solutions where you have a custodial solution, the actual assets are in custody somewhere, and the tokens are minted. So, where they minimized the regulatory to maximize liquidity, the actual token itself is a very weak basis. So, what I've said is, "Okay, when we look at RWAs, assets that have light level of permissioning are great for trading because they're very fungible, you don't need a lot of transactions, and they may have some light touches around that." And again, there's a spectrum of this that you go

up a step, right? On our side, where we we can do trading, but it's very cumbersome. But, where we're really great is collateral because when you look in in the vault for Ascend, boom, there you see the actual same same that you would on a share registry. And those tokens are really not meant to move, but when they do move, it's consequential. >> So, great for commercial paper or tokenizing >> Repo, all the big stuff. >> Mortgages and securitizing. >> do repo and MBS, absolutely. And and yeah, so Ascend is US-based. It was encouraged by, you know, the new environment in the US, and it was meant to solve the key problem, which is for all the hard work we've done with these

permission tokens, ERC-3643, the net great benefit is a collateral basis. Now, given the pedigree we have with the regulators, we felt we were in a unique position to be one of the first DeFi protocols to go for a full Finra regulation, uh which we've already achieved, which I'm very happy about for Ascend. So, we are we view Ascend as being two things: an on-ramp for DeFi to come onshore to the US, and a source of high-quality liquidity yield for DeFi borrowers and lenders, and most importantly, a way to emit tokens that are fully on-chain collateralized into DeFi for composability. So, now if I go to an investor who says, "Well, I own this private credit asset, it's liquid, it's in good standing, what's the net

benefit?" Well, you have now two benefits. One, you could get liquidity from from it on a line of credit without forfeiting your asset, always great, you can buy more. And more importantly, if you don't want just liquidity, you want to bridge into DeFi and get like an enhanced yield or put in swap, you can now do so. And we at Ascend the facility will deal with the liquidations through our reserve model. And we've had really massive adoption impact of this, and for Ascend already, we've had about 130 billion in assets pledged to the platform. So, what does that mean? Are we going to launch 130 bit? No.

>> Yeah. >> What it means is the problem of liquidity is so severe for permission assets that people are very willing to try and many solutions, right? Number two, the idea of being onshore, very difficult, we're one of the few teams that can do it, but the idea of collateral liquidity is going to be the way forward for this. Now, I fully anticipate a lot of like the RWA vaults being able to come online, but again, distinguish the different ways of doing it. You can have RWA vaults and you'll see more of them coming, but look into what's actually being pledged and collateralized. There will be a difference. And then T-Rex network, which is launched by Jo Khem Lebron, who's the one of the technical authors of ERC 2643, solves the little fragmented liquidity problem. It's a reference chain. It's optimistic and in

Polygon layer stack. They've had massive backing from several large institutions up front, which is really great to see, and it's meant for a reference chain for liquidity fragmentation across the 28 different chains that we that we operate. There's going to be a whole app store around that concept and building what is becoming more and more two new terms that I use, institutional DeFi and on-chain finance. Now, the reason why I I make a distinguish between those two terms, which are new for me, is I view institutional DeFi as DeFi, but both sides are KYC, right? Both sides are on that side, but still DeFi. On-chain finance to me is like repo, where you're taking a project where they don't really care about composability, but they're

doing something that's on a collateral basis, and they're doing it either in a walled garden, is like a you know, almost like your cantons of the world, and they're doing repo or Connexus even, and they're doing repo but using a blockchain technology in on-chain finance. So, you know, I've been evolving those terms. I and the team at SN we personally believe in permissionless DeFi. We believe there should be a full spectrum of this, and what we want to do is unify the two worlds of saying, "Hey, listen, all this great stuff that we've been able to do in RWA land that is intimidating for you guys in DeFi, we've solved that for you.

Let's Let's integrate and let's enjoy the best of both worlds and reunify." >> Well, you know, fantastic. Really exciting to see those two sides and those two projects, you know, gaining more traction and and getting to see those institutions becoming defiant in a sense and getting more more finance on chain. Really a great conversation. It's been a pleasure having you here on the show. So I really appreciate it and hope to to have you again really soon. >> Thank you Christopher. It's been absolute pleasure. Thank you for having me. >> Awesome. Thank you so much.