What is ERC-3643 (T-REX)?

Why some tokens need permission

With utility tokens, a transfer generally only needs the sender to have enough balance.¹ ERC-3643 says security tokens are different, because securities laws apply to them.¹ Such tokens "must be permissioned", so the issuer can track ownership and only eligible investors can hold them.¹

T-REX stands for Token for Regulated EXchanges.¹ The standard was created in July 2021, and its official page shows the status Final.¹

What the standard requires

An ERC-3643 token must work like ERC-20, so every ERC-20 function can be called on it.¹ But each transfer also goes through a compliance check.¹ The standard also requires these features.¹

• It must work with an on-chain identity system.¹
• It must be able to apply any compliance rule the regulator or the issuer needs.¹
• It must offer a way to check whether a transfer will pass, before sending it.¹
• It must be able to recover tokens for an investor who loses their private key.¹
• It must be able to freeze some or all tokens in an investor's wallet, and to pause the whole token.¹
• It must have an Owner role (the issuer) and an Agent role.¹
• Agents must be able to force transfers.¹

The identity registry

The identity registry is the list of approved investors. It links each wallet address to an identity contract and a country code.¹ Only agents can add or remove identities, and each security token has its own registry.¹

An identity contract holds claims. A claim is a signed statement from a trusted claim issuer.¹ It can confirm facts such as the holder's identity, location or investor status.¹

Every transfer is checked

A transfer only goes through if all of these are true.¹

1. The sender has enough free balance, not counting frozen tokens.¹
2. The receiver is in the identity registry and verified.¹
3. Neither the sender's wallet nor the receiver's wallet is frozen.¹
4. The token is not paused.¹
5. The transfer follows every rule in the compliance contract.¹

Two functions do the checking. isVerified checks whether the receiver is an eligible investor.¹ canTransfer checks token-wide rules, such as a maximum number of holders or a cap per investor.¹

Powers kept by the issuer

The owner appoints agents.¹ Minting and forced transfers only check that the receiver is verified. They skip the compliance rules.¹ Burning skips the eligibility checks altogether.¹ When tokens are recovered for an investor who lost their key, a record is kept on the blockchain.¹

The standard says it was audited by two security firms, Kaspersky and Hacken, which found no notable security concerns. It adds that the audits mainly looked at one implementation, by Tokeny.¹