ERC-1404: Another Security Token Standard from the Ethereum Community

ERC-1404: Another Security Token Standard from the Ethereum Community

Tokensoft has officially submitted the ERC-1404 token standard as an Ethereum Improvement Proposal (EIP) subtype. While the submission does not guarantee a future implementation, the added volume of Ethereum community securities tokens reflects the continued push toward the blockchain industry’s next evolution

Tokensoft’s Experience with Securities Tokens

Though securities tokens are a very new phenomenon, Tokensoft has already built up quite an impressive track-record.

In 2017, they became the first enterprise to offer tax support for STOs. In more than 50 countries— to include the US, England, and Australia— Tokensoft provides location-specific legislative guidance concerning STOs. They also furnish services to satisfy Know Your Customer (KYC) and Anti-Money Laundering (AML) requirements.

Their latest venture involves a new token standard through the Ethereum community. The ERC-1404 token standard features open-source software and was specifically constructed for security tokens, tokenized securities, as well as additional tokens which feature sophisticated compliance requirements.

The Development of the ERC-1404 Token Standard

The ERC-1404 was not merely developed with ease-of-use in mind for individuals, but for corporate governance, financial services, and securities regulatory compliance. As Tokensoft’s founder Mason Borda pointed out,

“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 Benefits of Coded Securities Tokens: Regulatory Transfer Restrictions Explained

The advantages of the ERC-1404 extend to a compliant user-friendliness that allows token issuers the ability to enforce transfer restrictions within a smart-contract. This allows for 1) the maximal authority the quantity of tokens that can be transferred, 2) the precise timing of when they can be transferred, and 3) specific conditions for the transaction.

This enables issuers to confirm the successful receipt of tokens, to check if a token recipient has been whitelisted, and even to verify if a sender’s tokens are frozen— a valuable function during a period of token lock-up.

The potential future of the ERC-1404 was best captured by the words of Lawson Baker, the Head of Tokensoft’s Special Projects Division:

 “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.”

What do you think of the ERC-1404, and how does it compare to other submissions such as the ERC-1400? Looking forward, will the Ethereum platform become a notable producer of compliant STOs? We’d love to hear what you think below.

Image courtesy of Medium.

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