Tokenizability: The Fifth Pillar of NEW-EIP

TL;DR

Tokenizability is not merely the ability to create digital tokens, but the comprehensive capability to preserve all essential properties of real-world assets—their temporal characteristics, regulatory classifications, and transfer restrictions—when representing them on blockchain. As the fifth pillar of RCP, it emerged from analyzing 31 regulatory requirements across 15 global financial authorities, addressing why financial institutions say “if a bond has no maturity, it’s not a bond.” This is the actual implementation layer that operates on top of the regulatory compliance environment created by the four previous pillars (Traceability, Privacy, Enforceability, Finality). Through three core mechanisms—token expiration mechanisms, differentiated regulation by asset class, and dynamic transfer restrictions—Tokenizability ensures that tokenized assets behave exactly as their real-world counterparts, finally bridging the last gap between traditional finance and blockchain.

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The Overlooked Truth in Finance’s Digital Transformation

In 2024, the tokenized asset market surged from $24 billion to $50 billion annually, attracting institutional investors’ attention. With BlackRock’s BUIDL fund launch, JPMorgan’s Onyx platform expansion, and DTCC’s shortening to T+1 settlement cycle, financial markets have clearly reached an inflection point in digital transformation.

Yet one bond dealer’s candid confession stopped us in our tracks:

“The bonds we trade have maturities. But blockchain tokens exist forever? That’s not a bond—it’s something else.”

This seemingly simple observation reveals the fundamental limitations of current security token standards. Neither ERC-1400 nor ERC-3643 fully represents the complex attributes of actual financial assets. If we think tokenization is simply moving ownership digitally, we’re missing the essence of financial assets.

Defining Tokenizability: The Missing Piece of the Puzzle

Before we dive into institutional requirements, we must first understand what Tokenizability truly means. This term emerged from our comprehensive analysis of 31 regulatory requirements across 15 global financial regulatory bodies. It is not simply “the ability to tokenize” or “tokenization capability.”

Tokenizability is the comprehensive set of technical and legal properties that enable a real-world asset to be fully and faithfully represented as a digital token while maintaining all its essential characteristics, regulatory attributes, and lifecycle behaviors.

This definition encompasses three critical dimensions:

1. Completeness of Representation: The token must capture ALL properties of the underlying asset—not just ownership, but temporal characteristics (maturity, expiration), classificatory attributes (asset type, risk profile), and restrictive conditions (transfer limitations, investor qualifications).
2. Behavioral Fidelity: The token must behave exactly as the real asset would—bonds must mature, options must expire, dividends must be distributed, and regulatory actions must be enforceable.
3. Regulatory Equivalence: The tokenized form must satisfy the same regulatory requirements as the traditional asset, enabling seamless integration with existing financial regulations and oversight mechanisms.

Why is this the fifth pillar? Because without Tokenizability, the other four pillars create a compliant infrastructure with nothing meaningful to regulate. It’s like building a perfect highway system without any vehicles. Tokenizability is what brings actual financial assets into this regulatory framework, transforming abstract compliance into concrete value.

The term itself—Tokenizability—was chosen deliberately. Just as “traceability” refers to the ability to trace, and “enforceability” to the ability to enforce, Tokenizability refers to the complete ability to tokenize while preserving all essential properties. It’s not about whether something can be tokenized (almost anything can), but whether it can be tokenized in a way that maintains its full financial, legal, and regulatory integrity.

Institutional Investors’ Hidden Requirements

The Bond Dealer’s Dilemma: “Bonds Without Time”

In traditional bond markets, DTCC processes trillions of dollars in bond trades annually, precisely tracking each bond’s maturity date, coupon payment dates, and call option exercise dates. The T+1 settlement cycle implemented since May 2024 has made this temporal accuracy even more crucial.

But how do current token standards handle these Temporal Properties? Surprisingly, they largely ignore them. With ERC-20’s simple totalSupply or ERC-1400’s partition concept, we cannot distinguish between a 10-year Treasury bond maturing in 2030 and a perpetual bond.

The Compliance Officer’s Nightmare: “Real-time Regulatory Changes”

BIS’s crypto-asset prudential standards, set to take effect January 2025, clearly distinguish between tokenized traditional assets (Group 1a), stablecoins (Group 1b), and other crypto-assets (Group 2), applying different capital requirements to each.

A global investment bank’s compliance head says:

“We trade Treasury tokens, corporate bond tokens, and real estate tokens on the same platform. Each has different regulations, but current token standards can’t even distinguish between them.”

The Risk Manager’s Challenge: “Invisible Risks”

IOSCO’s latest recommendations require the same level of risk management for tokenized securities as traditional securities. But how do we implement asset-specific risk profiles on-chain?

Three Revolutionary Mechanisms of Tokenizability

1. Temporal Properties: Restoring Time to Finance

Financial assets have an inseparable relationship with time. Bond maturity, option exercise periods, rights expiration—all these define an asset’s intrinsic value.

interface ITemporalAsset {
    // Set asset expiration time
    function setExpiration(uint256 timestamp) external;

    // Manage exercise periods
    struct ExercisePeriod {
        uint256 startTime;
        uint256 endTime;
        bytes32 rightType; // CALL, PUT, CONVERSION, etc.
    }

    // Automatic expiration execution
    function executeExpiration() external {
        require(block.timestamp >= expirationTime, "Not yet expired");
        // Automatically burn tokens and distribute payments at expiry
        _burnExpiredTokens();
        _distributeFinalPayments();
    }
}

This is not just technical implementation. According to the European Central Bank’s digital euro project report, “the core of programmable money is time-based conditional execution.”

2. Classificatory Properties: Establishing Asset Identity

Dynamic asset classification based on the Token Taxonomy Framework (TTF) enables regulators to understand asset characteristics in real-time and apply appropriate regulations.

struct AssetClassification {
    bytes32 primaryClass;    // EQUITY, DEBT, DERIVATIVE, COMMODITY
    bytes32 subClass;        // CORPORATE_BOND, GOVT_BOND, MBS, etc.
    uint8 riskTier;         // Risk rating 1-5
    bytes32[] jurisdictions; // List of applicable jurisdictions

    mapping(bytes32 => RegulatoryRule) rules;
}

JPMorgan’s 2024 report stated, “Without differentiated regulation by asset class, large-scale institutional investor participation is impossible.” Indeed, their Onyx platform already deploys different smart contracts for each asset type.

3. Restrictive Properties: Dynamic Transaction Control

Real-time transfer restrictions based on investor type, KYC level, and jurisdiction are the final puzzle piece of regulatory compliance.

function _beforeTokenTransfer(
    address from,
    address to,
    uint256 amount
) internal override {
    // Verify investor type
    require(investorRegistry[to].accreditationLevel >= 
            assetRequirements.minimumAccreditation,
            "Investor not qualified");

    // Check jurisdiction restrictions
    require(!isRestrictedJurisdiction(
            investorRegistry[to].jurisdiction),
            "Jurisdiction restricted");

    // Verify holding limits
    require(balanceOf(to) + amount <= 
            getHoldingLimit(to),
            "Exceeds holding limit");
}

Organic Integration with the Four Previous Pillars

Tokenizability doesn’t exist independently. Rather, it only has meaning on the foundation created by the four previous pillars.

Asset Lifecycle on Traceability’s Transaction Tracking

The transaction tracking required by FATF’s Travel Rule isn’t just recording “who to whom.” It must track the entire asset lifecycle—issuance, trading, rights exercise, expiration. Tokenizability implements each stage of this lifecycle in code.

Regulatory Compliance Within Privacy’s Confidentiality

Asset maturity information must be public, but holder identity must be protected. The RAI (Regulated Asset Identity) system achieves this balance:

struct RAI {
    bytes32 publicAssetId;      // Public: Asset identifier
    bytes32 privateHolderId;     // Private: Holder zkProof
    uint256 publicMaturity;      // Public: Maturity date
    bytes32 privateTerms;        // Private: Special conditions
}

Restriction Execution Through Enforceability’s Enforcement Mechanisms

Preventing expired bonds from continuing to trade is not a technical problem but an issue of enforceability. The six regulatory actions (FREEZE, SEIZE, CONFISCATE, LIQUIDATE, RESTRICT, RECOVER) can be automatically triggered at expiration.

Token Trading on Finality’s Legal Certainty

BIS’s Project Agorá aims for “seamless integration of tokenized deposits with tokenized central bank money.” This means token transactions are not just database updates but legally final settlements.

Practical Implementation: Expirable Bond Tokens

True innovation turns theory into reality. Here’s an example of actually functioning expirable bond tokens:

contract BondToken is IERC_RCP {
    struct Bond {
        uint256 maturityDate;
        uint256 couponRate;
        uint256 nextCouponDate;
        bool isExpired;
    }

    mapping(uint256 => Bond) public bonds;

    function mintBond(
        address to,
        uint256 amount,
        uint256 maturity,
        uint256 coupon
    ) external onlyIssuer {
        uint256 bondId = _getNextBondId();
        bonds[bondId] = Bond({
            maturityDate: maturity,
            couponRate: coupon,
            nextCouponDate: block.timestamp + 90 days,
            isExpired: false
        });

        _mint(to, bondId, amount);

        // Schedule automatic execution at maturity
        _scheduleExpiration(bondId, maturity);
    }

    function processMaturity(uint256 bondId) external {
        Bond storage bond = bonds[bondId];
        require(block.timestamp >= bond.maturityDate, "Not matured");
        require(!bond.isExpired, "Already processed");

        bond.isExpired = true;

        // Principal repayment
        uint256 principal = balanceOf(bondId);
        _distributePrincipal(bondId, principal);

        // Token burning
        _burn(bondId);

        emit BondMatured(bondId, principal);
    }
}

Asset Class Registry: Multi-layered Regulatory Structure

Each asset class has different regulatory requirements. A registry structure to manage this on-chain:

Asset Class	Regulatory Requirements	Transfer Restrictions	Holding Limits	Expiry Handling
Government Bonds	Minimum KYC	None	Unlimited	Auto-redemption
Corporate Bonds	Accredited Investors	Credit Rating Based	Portfolio 10%	Optional Extension
MBS	Institutional Investors	Jurisdiction Based	Risk Weighted	Early Redemption
Derivatives	Margin Requirements	Position Limits	Leverage Restrictions	Auto-settlement

Dynamic Transfer Restrictions: Real-time Regulatory Adaptation

Market conditions and regulatory environments continuously change. Dynamic transfer restrictions respond to these changes in real-time:

modifier checkTransferRestrictions(
    address from,
    address to,
    uint256 amount
) {
    // Market condition-based restrictions
    if (marketVolatility > CIRCUIT_BREAKER_THRESHOLD) {
        require(amount <= getDynamicLimit(), "Volatility limit");
    }

    // Real-time regulatory change reflection
    bytes32 currentRules = regulatoryOracle.getCurrentRules();
    require(
        isCompliantTransfer(from, to, amount, currentRules),
        "Regulatory restriction"
    );

    _;
}

The Completion of True RWA Tokenization

The Synergy of Five Pillars

When all five pillars of the RCP-based ERC-RCP standard are in place, true RWA tokenization is finally complete:

1. Traceability tracks transactions
2. Privacy protects sensitive information
3. Enforceability executes regulations
4. Finality ensures legal certainty
5. Tokenizability applies all of this to actual assets

Building Financial Institution Trust

Nasdaq’s recent analysis noted that “tokenized assets can be allies to regulation rather than means to bypass it.” Tokenizability is precisely the technical foundation that realizes this vision.

A global asset manager’s digital strategy head evaluates:

“For the first time, we can see bond tokens that behave like actual bonds on blockchain. This is the breakthrough we’ve been waiting for.”

Philosophical Reflection: Moving the Essence of Assets to Digital

Tokenizability is not just a technical standard. It’s a philosophical exploration of the nature of assets.

What makes a bond a bond? Is it simply an IOU, or a collection of rights and obligations that change over time? Is a stock just proof of ownership, or a complex bundle of voting rights, dividend rights, and liquidation rights?

The answers to these questions must be written in code. Tokenizability is the work of translating the ontology of financial assets into smart contracts.

Programming Time

Blockchain is essentially a machine that deals with time. Each block has a timestamp, and this chain of time creates immutable history. Tokenizability leverages this temporality to implement the lifecycle of financial assets.

Expiration is not death but transformation. When a bond expires, the bond token transforms into a cash claim. When an option is exercised, the option token transforms into the underlying asset token. Capturing and automating this moment of transformation is the core of Tokenizability.

The Ontology of Classification

All assets are classified. But in traditional finance, this classification is hidden in documents and practices. Tokenizability converts this implicit classification into explicit code.

Asset class is not just a label. It is the language of regulation and the grammar of risk. The difference between corporate bonds and government bonds is not just the issuer, but entirely different applicable regulations, required capital, and permitted investors.

The Necessity of Restrictions

Free transfer is the ideal of cryptocurrency. But in the world of regulated assets, restrictions are protection. Accredited investor restrictions protect uninformed investors, holding limits prevent systemic risk, and jurisdiction restrictions prevent legal conflicts.

Tokenizability redefines these restrictions not as oppression but as prudent freedom.

Future Outlook: Evolution of the Tokenization Market

The Landscape of 2026

BIS’s Project Agorá, Hong Kong’s Project Ensemble, and the US GENIUS Act—the future all these initiatives point to is clear: a fully tokenized financial system.

But this future is incomplete without Tokenizability. Bonds without temporal properties, assets without classification, securities without restrictions—neither regulators nor investors can trust these.

The Network Effect of Standardization

One bond implementing an expiration mechanism and all bonds sharing a standardized expiration mechanism are completely different worlds. Only in the latter is true interoperability possible.

When ERC-RCP is adopted as a standard, we can expect:

• Automated portfolio management: Automatic execution of expiration and reinvestment
• Real-time regulatory reporting: Automatic calculation of asset class exposures
• Cross-chain asset movement: Inter-chain movement maintaining the same properties

Conclusion: The Completed Puzzle

Tokenizability is the last piece of RCP, but also a starting point. Now we have the tools to implement all properties of financial assets on blockchain.

Bond dealers will no longer say “that’s not a bond.” Compliance officers will be able to apply regulations in real-time. Risk managers will be able to quantify all risks in code.

With all five pillars now erected, we have finally completed the bridge between TradFi and DeFi. On this bridge, trillions of dollars in assets will move freely, yet safely.

Tokenizability is not just a feature. It is the language for writing the future of finance in code. And now, we are ready to speak that language.

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References

[1]. Bank for International Settlements. (2025). Final global prudential standards for banks’ exposures to crypto-assets. https://www.bis.org/bcbs/publ/d567.htm

[2]. DTCC. (2024). Shortening the Securities Settlement Cycle to T+1. https://www.dtcc.com/ust1

[3]. International Organization of Securities Commissions. (2024). Policy Recommendations for Crypto and Digital Asset Markets. https://www.iosco.org/library/pubdocs/pdf/IOSCOPD747.pdf

[4]. Financial Action Task Force. (2024). Updated Guidance for Virtual Assets and Virtual Asset Service Providers. https://www.fatf-gafi.org/content/dam/fatf-gafi/recommendations/2024-Targeted-Update-VA-VASP.pdf

[5]. Token Taxonomy Initiative. (2023). Token Taxonomy Framework v2.0. https://tokentaxonomy.org/

[6]. Nasdaq. (2024). Tokenized Assets: An Ally to Regulatory Compliance. https://www.nasdaq.com/articles/tokenized-assets-an-ally-to-regulatory-compliance