TokenSoft Introduces New Ethereum-Based Security Token Standard

TokenSoft, a blockchain venture focused on securities tokenization, announced on Wednesday its engineers had developed a new Ethereum token standard called ERC-1404. The team posted its contribution to the Ethereum Improvement Proposal repository, but the new standard has not been approved yet. According to its creators, ERC-1404 is meant for security tokens, tokenized securities, and other types of tokens falling under complex compliance rules.

Security tokens are often developed on Ethereum but have a completely different functionality as they back real-world assets like shares in private companies or real estate.

The new standard is fully open-source, which is important for maintaining a high degree of security, quality, transparency, and interoperability. ERC-1404 was developed with a focus on banking, corporate governance, and securities laws.

TokenSoft founder Mason Borda commented:

“We’ve spent the past year gaining insight from issuers, top securities law firms and major exchanges to better understand their token compliance needs. Now, we’re excited to deliver a standard that comprehensively addresses those needs, and provides the tools necessary for issuers to adhere to global banking and securities laws.”

The ERC-1404 standard includes the same features and benefits associated with an ERC-20 token, but it has a few improvements that permit issuers to impose transfer restrictions based on the regulatory context. ERC-1404 comes with two key functions:

Thus, with only a few coding lines introduced in the standard, token issuers can enable smart contract restrictions allowing them control over the movement of the tokens, the number of units transferred, and the conditions of the transaction.

Lawson Baker, head of TokenSoft’s Project Zero unit, said:

“The future of security tokens requires compliance with relevant laws, interoperability, and a user experience that works for all skill levels. By supporting ERC-1404, token issuers, exchanges and wallets can deliver a great user experience to investors while ensuring compliance.”

The developers have invited interested parties to contribute to the discussions and the standard on GitHub.

ERC-1404 is not the first new Ethereum-based security token standard. Last week, blockchain developer Stephane Gosselin and his team proposed one called ERC-1400.

On Thursday, TokenSoft announced that it had introduced support for projects on R3’s Corda platform.