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Oraclizer Research

EIP Proposal Strategy: RCP and Compatibility with Existing Standards

TL;DR

Integrating Oraclizer’s Regulatory Compliance Protocol (RCP) into the Ethereum ecosystem is not merely a technical standard proposal, but a strategic challenge of balancing regulatory compliance with innovation. Moving beyond the limitations shown by existing standards like ERC-1400 and ERC-3643, RCP presents a comprehensive framework that systematizes 31 core requirements from 15 global financial regulatory agencies. Our approach centers on a modular EIP strategy that can achieve genuine regulatory compliance while maintaining compatibility with existing ecosystems.

The Regulatory Compliance Dilemma: Between Innovation and Compliance

With the growth of tokenized capital markets, we face a fundamental question: How can we maintain blockchain’s decentralized spirit while meeting traditional finance’s stringent regulatory requirements? This is not merely a technical problem, but a philosophical challenge that will determine the future of blockchain technology.

Over the past few years, security token standards like ERC-1400 and ERC-3643 have attempted to provide answers to this problem. However, our research findings show that these standards remain stuck in a fragmented approach to regulatory compliance[1]. For instance, ERC-1400 meets only 16 out of 31 regulatory requirements, while even ERC-3643 addresses just 15.

“Regulatory compliance is not optional. It is the fundamental condition for the existence of tokenized capital markets.”– RCP Research Team

This reality has convinced us of the need for a new approach. Our RCP-based EIP strategy is our answer to this challenge.

Limitations of Existing Standards and Market Demands

Structural Constraints of the ERC-1400 Ecosystem

ERC-1400 was a pioneering attempt for security tokens, but its practical limitations are clear. The biggest issue is its fragmented architecture. ERC-1594 (Core Security Token), ERC-1410 (Partially Fungible Token), ERC-1643 (Document Management), and ERC-1644 (Controller Token Operation) exist separately, requiring developers to perform complex integration work[2].

Even more serious is the oversimplification of regulatory actions. ERC-1644’s controllerTransfer function attempts to handle all regulatory measures through a single function. However, in actual financial regulation, asset freezing (FREEZE), seizure (SEIZE), and confiscation (CONFISCATE) each have different legal meanings and procedures.

ERC-3643’s Progress and Remaining Challenges

ERC-3643, starting from the T-REX protocol, shows a more sophisticated approach. Identity management through ONCHAINID and the automatic compliance verification system represent clear progress[3]. The fact that $28 billion worth of assets have already been tokenized through ERC-3643 demonstrates market confidence.

However, ERC-3643 also focuses on single-chain environments, creating limitations in today’s multi-chain ecosystem. Additionally, advanced features like differentiated regulatory application by asset class or cross-chain atomic execution are lacking.

💡 Tip: Standard Selection Guide

When selecting a token standard for your current project, consider these factors:

  • Complexity of regulatory requirements: If you only need simple transfer restrictions, ERC-1404 might suffice
  • Importance of interoperability: If integration with existing DeFi protocols is important, verify ERC-20 compatibility
  • Future scalability: Consider in advance whether you’ll need cross-chain deployment or advanced regulatory features

For detailed comparisons, refer to Chainalysis’s token standard guide.

RCP’s Comprehensive Approach: Systematizing 31 Requirements

Our research team’s analysis of recommendations from 15 global financial regulatory agencies resulted in 5 core regulatory groups[4]:

  1. Traceability: System-wide AML and transparent audit trails
  2. Privacy: Minimum disclosure principles and privacy protection
  3. Enforceability: Real-time regulatory measures and enforcement
  4. Finality: Legal certainty and dispute resolution mechanisms
  5. Tokenizability: Standardized tokenization of various asset classes

This framework goes beyond simple technical specifications to enable consistent implementation of regulatory philosophy. For example, the Financial Action Task Force (FATF)‘s latest guidelines[5] present enhanced requirements for Virtual Asset Service Providers (VASPs), and RCP provides a framework for implementing these requirements at the protocol level.

Modular EIP Strategy: Balancing Compatibility and Innovation

Informational EIP: Building Conceptual Foundation

Our first proposal, “EIP-XXXX: Regulatory Compliance Protocol (RCP) for Tokenized Capital Markets” as an Informational EIP, provides theoretical foundation. This is not merely a specification document, but a document containing the regulatory philosophy of tokenized capital markets.

This approach presents the necessity and direction of regulatory compliance to the Ethereum community while guiding the future development direction of related standards. Importantly, this EIP provides consistent regulatory philosophy without forcing specific implementations.

Standards Track EIP: Practical Implementation

Our second proposal, “EIP-XXXX: Security Token Standard with Regulatory Compliance (ERC-RCP)” presents implementable standards. The key is to meet RCP’s comprehensive requirements while maintaining compatibility with ERC-1400.

🔥 Key Reference: Compatibility Strategy

ERC-RCP provides a migration path for existing ERC-1400-based projects. This ensures ecosystem stability through evolutionary rather than revolutionary change.

RCP EIP Strategy Diagram RCP-based EIP Strategy vs Existing Standards ERC-1400 16/31 • Fragmented ecosystem • Basic controller actions • Limited compliance • Single chain focus PARTIAL ERC-3643 15/31 • ONCHAINID integration • Automatic validation • ERC-20 compatible • $28B assets tokenized IMPROVED RCP-based EIP 25/31 • Comprehensive regulatory framework • 6 modular enforcement actions • Cross-chain atomic execution • OCID identity management • ERC-1400 compatibility maintained • Real-time compliance monitoring COMPLETE Key RCP Innovations Modular Architecture • 6 independent modules • Selective implementation • Easy maintenance • Future extensibility • Community contribution Advanced Enforcement • FREEZE, SEIZE, CONFISCATE • Time-based execution • Conditional automation • Cross-chain atomicity • Gasless enforcement Global Compliance • 15 regulatory agencies • 31 requirements covered • FATF R.15 alignment • Regional customization • Future-proof framework Ecosystem Integration • ERC-1400 compatibility • Migration pathways • DeFi interoperability • Minimal code changes • Backward compatibility Implementation Timeline Q2 2025 Informational EIP Q3 2025 Core Modules Q4 2025 Advanced Features Q1 2026 Community Adoption Figure 1. RCP-based EIP Strategy: Comprehensive Regulatory Compliance Framework

Strategic Differentiation of 6 Modules

To manage RCP’s complexity, we have differentiated functionality into 6 independent modules:

1. Core Regulatory Action Module

We advance existing standards’ simple controllerTransfer into 6 differentiated actions:

  • FREEZE: Temporary transaction suspension
  • SEIZE: Custody transfer by court order
  • CONFISCATE: Permanent ownership forfeiture
  • LIQUIDATE: Forced liquidation for monetization
  • RESTRICT: Conditional transaction limitations
  • RECOVER: Return of stolen assets to original owner

2. Identity Management Module

Through the Oracle Contract ID (OCID) system, we provide integrated management of on-chain and off-chain identities. This goes beyond simple KYC to enable systemic AML across the entire cross-chain ecosystem.

3-6. Advanced Enforcement, Cross-chain, Audit, Asset Lifecycle Modules

Each handles advanced features such as time-based regulation, cross-chain atomic execution, real-time monitoring, and asset class-specific management.

Technical Innovation and Practical Considerations

Gas Efficiency and Scalability

One of the biggest challenges in RCP implementation is increased gas costs due to complex compliance logic. We address this through several strategies:

  • Batch processing: Consolidating multiple compliance checks into single transactions
  • Off-chain verification: Processing non-critical verifications off-chain and submitting only proofs on-chain
  • Layer 2 integration: Optimized implementation on Polygon, Arbitrum, etc.

Interoperability with Existing Ecosystem

Maintaining compatibility is central to our strategy. ERC-RCP fully supports existing ERC-20 interfaces and is designed so that DeFi protocols can support RCP tokens with minimal modifications.

// Extending RCP functionality while maintaining ERC-20 compatibility
interface IERC_RCP is IERC20, IERC1400 {
    // Existing interfaces remain unchanged
    // Only RCP-specific functions added
    function executeRegulatory(bytes32 action, address target, bytes data) external;
    function checkCompliance(address from, address to, uint256 amount) external view returns (bool);
}

Alignment with Global Regulatory Environment

Alignment with FATF Recommendations

FATF’s updated guidelines for 2024[6] require enhanced supervision of virtual assets. Particularly with the acceleration of Travel Rule implementation worldwide, RCP provides mechanisms for automating these requirements at the protocol level.

Reflecting Regional Regulatory Characteristics

Europe’s MiCA regulation, US SEC guidelines, and various Asian countries’ digital asset regulations each take different approaches. RCP’s modular structure enables selective implementation tailored to regional requirements.

📊 Information: Global Regulatory Status

  • 75% of 147 jurisdictions only partially comply with FATF R.15 recommendations
  • 75% of 130 mutual evaluations received inadequate assessments for virtual asset regulation
  • 30% of jurisdictions have not yet implemented the Travel Rule

Source: FATF 2024 Report

Community Feedback and Iterative Improvement

Our EIP proposal process aims for a transparent and collaborative approach. Through open-source development via GitHub and regular community workshops, we are gathering input from various stakeholders.

We particularly value collaboration with existing standard development teams. We would welcome technical dialogue with teams like Tokeny (ERC-3643), Polymath (ERC-1400), and others to explore mutually complementary development directions

Future Vision: Blockchain Where Compliance is Natural

The future we envision is a blockchain ecosystem where regulatory compliance becomes a natural characteristic rather than a burden. When RCP-based EIPs are widely adopted, developers will be able to focus on innovation without worrying about regulation.

This means more than just technical achievement—it represents true convergence of blockchain and traditional finance. A world where tokenized real estate, securities, and commodities interact seamlessly with existing financial systems—that is our ultimate goal.

“We believe that regulation and innovation are not opposing forces, but relationships that strengthen each other. RCP is the first serious attempt to implement this belief.”– Oraclizer EIP Development Team

Learn More

References

[1]. Horizen Korea, Oraclizer Core Team. (2024). A Regulatory Compliance Protocol for Asset Interoperability Between Traditional and Decentralized Finance in Tokenized Capital Markets.
https://www.slideshare.net/slideshow/embed_code/key/kAZFXrBLjtkinq

[2]. Tokeny Solutions. (2024). ERC-3643 vs ERC-1400: Smart Contract Standards for Security Tokens. https://tokeny.com/erc3643-vs-erc1400/

[3]. Chainalysis. (2025). Introduction to ERC-3643 Tokens. https://www.chainalysis.com/blog/introduction-to-erc-3643-ethereum-rwa-token-standard/

[4]. Financial Action Task Force (FATF). (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]. FATF. (2024). Status of Implementation of Recommendation 15 by FATF Members and Jurisdictions with Materially Important VASP Activity. https://www.fatf-gafi.org/en/topics/virtual-assets.html

[6]. Crystal Intelligence. (2025). FATF 2023/24 Report: Crypto Compliance Risks & Gaps. https://crystalintelligence.com/crypto-regulations/fatf-2023-24-report-crypto-compliance-risks-gaps/

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