Why can't I send some tokenised assets to any wallet?

Why the rules exist

Tokenised securities have to follow securities laws.¹ ERC-3643, an Ethereum token standard for securities, says such tokens "cannot be permissionless like utility tokens".¹ They must be permissioned, so the issuer can track ownership and make sure only eligible investors hold them.¹

Under ERC-3643, a wallet is only approved once a trusted party has checked its owner's identity.¹ These checks are called KYC, short for "know your customer".³ The Franklin fund, for example, collects information about you under its anti-money laundering and KYC policies before it opens your account.²

How an allowlist works

An allowlist is a list of approved wallets. Many documents call it a whitelist.^1,2 Franklin's prospectus says its fund uses a smart contract on a public blockchain with a whitelist of permissioned wallets.²

Under ERC-3643, a transfer only goes through if all of these are true.¹

• The sender has enough tokens that are not frozen.¹
• The receiver is on the token's identity list and has passed its checks.¹
• Neither the sender's wallet nor the receiver's wallet is frozen.¹
• The token is not paused.¹
• The transfer passes the token's other rules, such as a cap on how many people may hold it.¹

The standard also requires these powers.¹

• Freezing an investor's tokens, in part or in full.¹
• Pausing the whole token.¹
• Letting an agent force a transfer.¹
• Recovering tokens if an investor loses access to their private key.¹

Franklin's prospectus is just as clear. Its fund's shares on the blockchain are under the sole control of the transfer agent. The agent can correct errors and unauthorised transactions, and limit transfers.²

Rules differ from product to product

• BUIDL. At launch, tokens could move at any hour, but only to other pre-approved investors.⁴
• OUSG. As of October 2026, Ondo's documents say tokens can move freely between investors who have already signed up with Ondo's qualified funds.⁵ They say the most common route in is a net worth above $5 million, for a person.⁶
• USDY. As of October 2026, Ondo's documents say USDY can be passed to people who haven't signed up with the issuer, but you must sign up to create or redeem tokens.⁷ They say it may not be offered or sold to US persons unless the offer is registered or exempt.⁸

What this means for you

Rules like these protect the legal claim behind a token. They also limit who can buy it from you. The WEF says tokenised assets lack enough secondary-market trading and depth.³ More than $15 billion of tokenised fixed income had been issued by 2024, the WEF said, but nearly half of these projects reported turnover below $1 million.³

The rules also cut some risks for the wider system. The FSB counted the focus on permissioned platforms among the reasons tokenisation posed little risk to financial stability in 2024.⁹