Introduction

The latest Spaces session focused on the importance of standardization for Real World Assets (RWAs) and brought together various industry experts to share insights. The goal was to explore key issues related to standardizing token formats and to discuss potential solutions.

Key Challenges

Legal & Compliance Issues

Various speakers emphasized that different jurisdictions have different regulations, making a unified standard difficult to implement. They also pointed out that compliance involves more than just technological solutions; it requires adherence to legal frameworks.

Trust & Data Reliability

Standardization of disclosures and the quality of data available for these disclosures were another major focus. Trust-building was identified as crucial to gaining wider adoption from traditional finance sectors.

Technical Compatibility & Modularity

Participants agreed that while ERC standards (like ERC20, ERC721) provide a good foundation, they are sometimes insufficient for the complexities involved in RWAs. The need for additional, modular components that can be tailored to specific financial instruments was highlighted.

Solutions & Path Forward

Modularity & Flexibility

Several speakers suggested modular approaches where a core standard can be extended for specific use cases. For instance, a modular approach can accommodate both equity and debt, which have distinct functional requirements.

Automation & AI Integration

The potential for automation, driven by smart contracts and AI systems, was discussed extensively. Automation can streamline settlements, compliance, and even portfolio management.

Collaboration Across Sectors

The importance of collaboration among financial institutions, legal experts, and tech providers was emphasized for developing a usable, scalable standard.

Flexibility in Legal Frameworks

Speakers pointed out that legal standards change over time, and any standardized token format must be adaptable to these changes.

Closing Thoughts

The session concluded with a consensus on the need for ongoing dialogue and collaboration. While standardization is no small feat, the collective efforts in innovation and cooperation make it an attainable goal.

Looking Forward

The next session promises to delve deeper into these topics and explore further innovations in the RWA space.

Abstract

The Spaces event focused on the challenges and potential solutions related to standardizing token formats for Real World Assets (RWA). The discussion brought together various experts from the fields of blockchain, legal, and financial technologies who shared their views on the importance of standardization for liquidity, compliance, and automation. The primary obstacles identified included legal variability across jurisdictions, standardization of disclosures, and the need for compatible technical infrastructures. Speakers highlighted the role of modularity in standards, the necessity of trust-building through reliable data, and the inevitability of AI and automation in future financial systems.

Highlights

Legal and compliance issues are a major obstacle to standardizing token formats for RWAs.
Standardization of disclosures and data reliability are crucial for building trust.
A modular and flexible approach to standards can accommodate various financial instruments.
Automation and AI will play significant roles in future financial systems.
Ongoing collaboration among financial, legal, and tech sectors is essential.

Outlines

03:00 Introduction and welcoming the audience.
05:05 Overview of the series and its focus on RWA problems.
06:07 Introduction of the first speaker, who discusses tokenization and liquidity solutions.
08:23 Victor Sanchez introduces Kinto and its approach to RWAs.
10:23 Another speaker discusses Polytrade and standardizing token formats.
12:36 Discussion on the limitations of current standards (ERC20, ERC721, ERC1155).
14:20 Points on the dangers of assuming compliance just from technological standards.
18:49 Various experts weigh in on the challenges and need for standardization.
27:01 Discussion on key obstacles and the need for collaboration.
34:02 Further talk on how different jurisdictions affect standardization efforts.
42:54 The role of modularity in standard token formats is discussed.
48:50 Potential for automation in settlements, compliance, etc.
58:25 Final thoughts and consensus on continued dialogue and collaboration.

Transcript

Shreya Berry (Host) 03:00 – 03:15

GM GM Everybody.

Shreya Berry (Host) 03:34 – 03:46

I think we’ll just give a minute more for everybody to join in and then the session has started. How’s the day going for you guys?

Vinay (CEO Mattereum) 03:52 – 03:57

A lot going on. It’s a really busy time in crypto. What change? What transformation?

Shreya Berry (Host) 04:46 – 06:05

Awesome. I think we have a lot of people joining in already. We’ve got Edwin joining as well. All speakers are here, really excited to get this started. So thanks to everybody in the audience for joining today and taking the time to be here. This is our fourth episode of the series. We usually debug problems and issues, taking them head-on with builders who are in the game every single day to unlock new opportunities for RWAs.

We do these spaces every Tuesday and Friday at 6 PM GST, so you can tune in every week for insights on problems in RWAs and how these builders are solving them. We have speakers from Kinto, Mattereum, Swarm, and Brickken. Thanks again to all the speakers for being with us today. I’d like to give the stage to the speakers to introduce themselves and their projects. Philip, why don’t you go first?

Philip (Co-founder Swarm) 06:07 – 06:56

Sure. Great to be here. Thanks for making this possible. I’m from Swarm. We’ve been in the market doing RWAs since 2018 in different shapes and forms. Today’s Swarm is a protocol by which we tokenize stocks and bonds, and we also have a gold product.

On the other hand, we build liquidity solutions that are adequate for RWA trading. We have something called DotC and different lending protocols in the backend. We’re trying to develop what’s possible in the market under both technical and regulatory constraints. Over to Vinay.

Vinay (CEO Mattereum) 06:59 – 08:09

Sure. Hey, I’m Vinay. I’m from Mattereum, a Swarm customer. We work on the Swarm platform and were established around the same time, in 2017. We focus on the standardization of the legal machinery that defines why a real-world asset is valuable. So, if you have an asset issued in Brazil and another in Belize, we provide a standardized framework rooted in international legal norms, allowing for apples-to-apples comparisons between assets that are physically different. This enables them to be managed in the same portfolio without huge legal overheads.

A close example of that from the world of TradFi would be ISDA, the International Swaps and Derivatives Association, which is a standard definition for a particular class of financial instruments. There are about $600 trillion of assets in the world defined by those ISDAs. It’s an attempt to make the RWA industry standardize on a single set of legal norms that can then be represented using whatever technology is best at the time.

Shreya Berry (Host) 08:19 – 08:22

Thanks, Philip. Vinay, Victor, do you want to go next?

Victor Sanchez (CEO Kinto) 08:24 – 10:09

Of course, yes. Hi, everyone. My name is Victor Sanchez, and I’m the CEO of Kinto, the safety-first L2. Our approach to RWAs and compliance has been a bit different. We’ve changed the level of abstraction where compliance is applied. We know many protocols and tokens are trying to be compliant through standardization mechanisms. In Kinto’s case, we’ve imposed a new consensus rule. It’s still permissionless, but anyone can start this KYC or KYB process on our chain through an anonymous process.

We call it user-owned KYC. You can select from more than one provider that you feel comfortable with. We’re working with Synapse, Plaid, and Onfido. The difference is that no PII is stored on-chain. However, you can still volunteer some of this data to protocols and applications that require storing some of this information. On top of that, we also have account abstraction at the chain level. Everyone on our chain has a smart contract wallet with recovery capabilities tied to KYC and KYB. It’s a bit different from other approaches, and I’m excited to discuss how to put RWAs on-chain with these standardization processes.

Shreya Berry (Host) 10:19 – 10:21

Servey, why don’t you go next?

Servey Matt (CEO & Co-Founder Brickken) 10:23 – 11:08

Yes, hello everyone. It’s nice to be here with all of you. My name is Servey Matt, and I’m the CEO and founder of Brickken. We’re a plug-and-play solution for the tokenization of real-world assets. We focus on helping companies digitize and organize their financial instruments, such as equity and debt. We provide a one-stop solution for them to digitize their assets, create and maintain tokens, have an investor portal, and manage their assets, investors, and treasuries. We’re trying to onboard Web2 companies into the Web3 economy. We’ve tokenized over $200 million in 40 different countries and continue to grow. Thanks for having me here.

Shreya Berry (Host) 11:13 – 11:16

Ashish, over to you.

Ashish Sood (CTO Polytrade) 11:19 – 11:47

Absolutely. First of all, thank you for having us, and thanks to the speakers for being here. Polytrade is an aggregator for RWAs, and our approach to standardization has been very different. We’ve created our own ERC-6960 and wrapped multiple ERCs within the same format, standardizing it for people to build a secondary market on it. I think we have some interesting points to cover today, and I’m looking forward to this discussion.

Shreya Berry (Host) 11:52 – 12:29

I think Ashish has set it up quite well for us to get started on this topic today. A crucial topic we’re discussing today is how standardizing token formats could shape the future of RWAs. That brings me to our first question of the day: What existing limitations do standards like ERC-721 and 1155 present in accurately representing these diverse asset classes? The stage is open to everyone. Anyone can go first.

Philip (Co-founder Swarm) 12:36 – 14:17

Sure, this is Philip from Swarm again. Let me give you some thoughts on this. I think we focus a little too much in the space on calling stuff standardization when it’s actually about developing things that can interact with one another. With ERC-20 and different NFT token standards like 721 and 1155, we have great basics to allow interaction to be done successfully. Whenever we look at derivatives of these, like extensions of the ERC-20 format to meet requirements such as restricted transfers or data connectivity, it doesn’t violate the core principles of ERC-20.

So, sometimes, the topic of standardization is overblown because beyond ERC-20, no one has really agreed on further standardizations in the fractional token space. But it’s more about workflows connected with those tokens and how to make them accountable with one another. Over to anyone else who wants to chip in.

Servey Matt (CEO & Co-Founder Brickken) 14:21 – 16:11

Yeah, I’ll chip in. I couldn’t agree more with you, Philip. I think the whole idea of what standard became the compliant one just went into marketing. Technology doesn’t make you compliant; it’s about processes, bureaucracy, and even offline contracts. Technology aids in compliance, but using a specific standard doesn’t make you compliant. I’ve read about T-Rex 3643, and it helps standardize protocols to unite apps and chains, but it doesn’t automatically make you compliant with the SEC or anything.

I think it’s dangerous marketing, especially with securities, to claim that using a specific standard makes you compliant. I’ve spoken with companies in this space where they think using a certain protocol makes them compliant. But just using Protocol 3643 doesn’t mean anything. It’s like using Windows for something – it’s not enough. It’s dangerous to believe that there’s one standard to rule them all. At Brickken, we’ve decided to stick with ERC-20 and make some modifications, but we aim to avoid adding complexity to technology or applications.

Victor Sanchez (CEO Kinto) 16:14 – 17:57

I completely echo and agree with my peers here. ERC-20 is a small miracle, considering how millions of people have been trading ERC-20s, ERC-721s, and 1155s for years. Trying to reinvent the wheel to fix these standards would become an extreme exercise in moving all the engines and connections built on top of these standards. Are these standards perfect? Absolutely not. But mixing what technology can do with what compliance or legal requires is a dangerous game. If you’re only using tech, you’re likely not

compliant. Compliance can mean very different things depending on the use case and jurisdiction.

When we look at tokenizing assets in Kinto, we try to go where people are. Today, people are using ERC-20, ERC-721, and ERC-1155. How can we help them make those happen? For new assets, having some of these standards will be useful, but we need to work with the technology that’s there and has shown massive adoption.

Ashish Sood (CTO Polytrade) 18:03 – 18:04

Vinay, do you want to go first?

Vinay (CEO Mattereum) 18:05 – 20:20

Sure. I mean, basically, a technical standard can solve the problems of technical compatibility. For instance, if I have a big complicated JavaScript user interface wrapped around an exchange, technical interoperability means that tokens defined using different backends can all use the same kind of APIs and work seamlessly. But for assets, technical compatibility is only one of several layers, including regulatory checks, legal status, trust in custodians, and dispute resolution mechanisms.

We need technical standardization to get liquidity, but deeper standardization is required across other layers. Otherwise, it becomes difficult for users to put multiple assets from multiple providers into the same portfolio because the legal, governance, custodial, and insurance factors are all different. Standardization starts with the technical layer but must extend to other layers to achieve global mega liquidity like we see in PLC stocks rather than creating a complex system where every asset has a different legal definition and set of risks.

Ashish Sood (CTO Polytrade) 20:23 – 21:47

Taking a piece from what you said, Vinay, Polytrade has been fortunate to work with many great players building different products in different categories. One thing we realized early on is that there may never be a one-size-fits-all standard. ERC-20 was an exception, but for real-world asset tokenization, there are two key criteria: technical and legal. On the technical side, we’ve tried to wrap all ERCs under one new ERC to enable building a secondary market on it.

For the future, I believe we’ll see standardization by category – one standard for real estate, another for stocks, etc. We have some great people here to set those standards for the industry, and it’ll be interesting to see how it evolves. To build a secondary market and be an aggregator to gain more liquidity, we’ll need to build technical integrations, whether it’s the wrapper we’ve developed or the API we’re discussing.

Philip (Co-founder Swarm) 21:52 – 23:00

I completely agree with that. What’s missing in that discussion, though, is the connective tissue between the token infrastructure and self-declarations or data. The issuer must be able to verify that they’re validly representing an asset with certain metadata. Blockchains are great for this because other verified or unverified parties can attest to that information. That’s the power of tokenization – something that hasn’t been possible in traditional financial markets. The sooner we, as an industry, use these additional layers beyond the token itself to build trust in the asset and make trading decisions based on connected data, the sooner we’ll unlock benefits that previously couldn’t be achieved.

Ashish Sood (CTO Polytrade) 23:03 – 23:37

I completely agree with that. As an aggregator, we’ve been looking into decentralized data source verification. Currently, we rely on the protocol for verification, but we’re exploring how third parties can directly put data on-chain and verify the protocol. It’s an interesting avenue and a topic worth deep diving into.

Victor Sanchez (CEO Kinto) 23:43 – 24:57

Definitely. I think one of the next big challenges is going to be the ability to combine and extend these tokens. Even if you can represent the value of RWAs, when composability arrives, you need to ensure they’ve been measured under the same rules and defined under the same standards. Composability was what made DeFi great and revolutionized the industry, but it’s impossible without standardization and a robust data layer. The real challenge comes when you want to extend the utility of these assets, like lending or borrowing against them. That’s where the true difficulty of composability emerges.

Philip (Co-founder Swarm) 25:03 – 26:23

That’s a great point, Victor. When it comes to lending and borrowing, let’s be honest – it’s essentially an options protocol. You’re setting conditions under which you’re willing to sell your asset and putting it into an involved contract from Maker, Aave, or others. This is a derivative, not a security or RWA contract, but it’s a derivative smart contract that does something with the underlying token. It has succeeded in the market due to the size of the protocols and the lack of hacks over time. It’s like Darwinism for smart contracts – the best ones survive. But it wasn’t standardized by a financial institution or service provider; it evolved naturally through market forces.

Shreya Berry (Host) 26:29 – 26:53

I love the unanimity on the table already. I think it’s clear that the existing standards weren’t designed with the complexity of RWAs in mind. This brings me to our next question: What are the key obstacles to industry-wide adoption of standardized token formats for RWAs, and how can stakeholders like us collaborate to overcome them?

Ashish Sood (CTO Polytrade) 27:01 – 28:12

I think the key obstacle is us – we need to come together more often, like we’re doing in these spaces. Legal is another big challenge. While we can standardize technically, there’s still a lot of dependency on the real world, which reflects in our growth and adoption by Web2 folks. The legal side is crucial. We need to come together on basic parameters for tokenizing and standardizing assets. Even if we use different ERCs, the data we put on-chain can be standardized. If we can agree on common datasets, everyone can build something on them. That’s how we can truly come together.

Philip (Co-founder Swarm) 28:16 – 29:59

I agree. Part of it is less about standardization and more about standardizing disclosures. We’re still discovering which smart contracts and assets work well on-chain, what’s adequate, and what workflows need to be added. The sooner we get reliable disclosures – not just data, but also attestations, security audits, and regulatory audits – the sooner off-chain financial players can gain trust in on-chain assets. We need to use easier language and transparent processes. We don’t always need to declare something different from traditional finance. We can use the same vocabulary and mimic equivalent processes on-chain, making it more compatible with today’s financial world.

Victor Sanchez (CEO Kinto) 30:02 – 33:28

Absolutely. During our research at Kinto, we discovered three main concerns for traditional financial institutions: security, counterparty recognition, and the issue of dusting. Security is paramount – no matter what we’re building, we must guarantee a level of security comparable to what these institutions are used to. We’ve worked hard to build a reputation, but the fear of security breaches still lingers.

Counterparty recognition is another major issue. Institutions need to know the source of funds for any transaction and must be able to access that information years after the fact. This is why Kinto’s APIs allow encrypted data access, either stored immediately or retrieved years later. The issue of dusting is also significant – when anyone can receive anything at any point, it can cause problems with regulators. If you’re dusted with a token, you might have to justify its reception, which can create a headache for institutions. Until we solve these basic issues, we won’t be able to tackle higher-level challenges.

Philip (Co-founder Swarm) 33:31 – 33:49

You can solve that simply by burning the tokens you’ve been dusted with. In conversations with regulators, it’s been a topic, but not a major concern, because methods like this can be put in place.

Shreya Berry (Host) 34:03 – 34:06

Vinay, do you want to add something?

Vinay (CEO Mattereum) 34:08 – 38:02

Yes, sure. There are simple ways and hard ways to look at this. There’s a saying that there’s no problem so complicated that if you look at it the right way, it doesn’t become more complicated. The simple truth is that a token either reflects ownership of all of something or ownership of part of something. If it’s all of something, it’s like an NFT. If it’s part of something, it’s like an ERC-20. The more complicated technical representations are about making the software engineering better, similar to how IPV4 moved to IPV6. This work is essential for efficiency and interoperability, especially when it comes to composability.

The harder obstacles are in existing financial practices. There’s a huge world out there that wants to do things better but struggles to achieve it. We’re moving toward a future where anyone can buy anything in the world, either in whole or in part, with computers handling the administrative details. By 2050, every blade of grass on Earth might have a serial number, and trading will be staggeringly efficient thanks to AI systems.

We’re at the beginning of a massive rush to tokenize real-world assets, and it’s important that we all work together to get this right. The decisions we make now will shape the future for decades, so it’s crucial that we think long-term and get this right.

Shreya Berry (Host) 38:

06 – 38:44

I agree 100%. There’s a strong need for collaboration across the board, whether between financial institutions, regulators, or tech providers. The conversation has been great so far, but let’s shift focus to solutions. My next question is, in what ways can a standardized token format for RWAs be designed to accommodate the diverse range of asset types and financial instruments while still maintaining the benefits of standardization?

Servey Matt (CEO & Co-Founder Brickken) 38:48 – 41:19

I’ll jump in on this one. Standardization is just the first step. You need modularity to fit certain functions because equity is different from debt or other financial instruments. I don’t think one standard fits all. For example, equity can be perpetual, but debt has to be returned. If you standardize the same contract for both, you’d run into issues when the debt needs to be returned.

Standardization is good for setting up the basics, like distribution and compliance, but you can’t standardize everything. Different financial instruments require different handling. For example, regulations vary by jurisdiction, so the standardization that works in one country might not work in another. We might not see full standardization, but we can have a main core with modular adaptations for different situations and legislations.

Ashish Sood (CTO Polytrade) 41:26 – 41:51

I completely agree, Servey. That’s exactly the way to move forward. As I said earlier, I think we’ll have different standards for different categories in the future. The key is to build bridges for people to create on top of these standards. The tech part will play a significant role in this.

Shreya Berry (Host) 41:60 – 42:04

Victor, Philip, anything to add?

Philip (Co-founder Swarm) 42:06 – 43:45

I think it was well said. ERC-20’s tradability and fractionalization work well, but modularity needs to be created around it. For example, if you want a restriction, like a transfer restriction, there needs to be a rules contract linked to the original token. This could evolve into a standardized rules contract or a multi-signature administrator contract. The same goes for data – how do you patch data in? Who can update the asset’s information? How do you differentiate public data from private data, and who has access to private data?

These are questions that need to evolve over time for different asset classes. We don’t need to solve everything right now; it’s more about generating use cases and seeing which methods work best for the broader space.

Victor Sanchez (CEO Kinto) 43:47 – 44:58

I agree with everything that’s been said. Flexibility in standardization is essential because not only do regulations vary by country, but they also change over time. For example, if we focus too much on how to represent identity on-chain today, the moment governments adopt zero-knowledge proofs, everything will change.

Some clear pillars need to be established, like representing identity, tradeability, and transferability options. But without flexibility, any standardization effort is doomed to fail because we’re dealing with a moving target in a rapidly evolving industry.

Vinay (CEO Mattereum) 45:10 – 48:16

I come from a disaster relief background, where we identified invariants in disasters – things that stay the same no matter what. For example, people need a certain amount of water per day to survive. When I entered this space in 2017, I tried to identify the invariants in this industry. Regulation and law change relatively quickly, but the hard invariants are litigation. If someone tells you something is a kilogram of gold, and it turns out to be tungsten with a layer of gold, you have a problem.

These hard invariants, like litigation, don’t change much. You can create standardized contracts around asset definitions and legal enforcement mechanisms that will likely remain unchanged for decades. Material has done some work on this with the Material Asset Passport, a contract standardization framework. It’s about getting asset definitions correct and connecting them to international legal norms. We can achieve a high level of adoption and agreement on these standards without the complexity of fast-moving areas like KYC/AML.

Shreya Berry (Host) 48:23 – 48:53

Great insights. I think I’ll just touch on the last topic for today: automation. Can the standardization of these token formats automate processes like settlements, dividend payments, and even compliance?

Philip (Co-founder Swarm) 48:55 – 51:32

The short answer is yes, 100%. Blockchain infrastructure allows for open API ecosystems where anyone can build technology that interacts with smart contracts. For instance, if you’re trying to value an asset, you can traverse the data connected with the digital asset, build a subgraph, and have data automatically delivered to you to make informed decisions before buying. Automation makes this process much more real-time and efficient.

Settlement is the whole name of the game here. It’s not just about having a single source of truth from a data perspective but also about using smart contracts to enforce conditions like pricing, counterparty qualifications, and other variables. Immediate settlement, fractionalization, and 24/7 tradability are key drivers of efficiency in this space, eliminating the need for multiple intermediaries and associated fees.

Ashish Sood (CTO Polytrade) 51:44 – 52:30

I completely agree. Automation is a significant part of the future for standardization. We’ve seen it in Web2, and with new account abstraction formats, we’ll see it in Web3 as well. The biggest thing required for automation is access, and the new standards will allow us to achieve that. It’ll be interesting to see how we approach this, considering the legal and technical variables.

Vinay (CEO Mattereum) 52:44 – 55:33

I work closer to the legalistic end of the machinery, but the Material Asset Passport is a standardized data structure we use for representing risk and liability around assets. This data is stored in XML files, which can be automatically inspected and used for decision-making, either through deterministic systems or AI. The goal is to automate processes while ensuring that the data is accurate and legally enforceable.

When we talk about automation, we’re likely talking about AI systems that will optimize portfolios by analyzing data on-chain and making trading decisions. This future of AI-driven trading based on blockchain data is inevitable, and it’s important that we get the standards right to support it.

Victor Sanchez (CEO Kinto) 55:36 – 58:21

I agree with Vinay, but I also worry that automation could easily leave people out of markets if we’re not careful. For example, if we automate processes based on data from providers like Chainalysis or Crystal Intelligence, we could misidentify people and unfairly exclude them from trading. It’s essential that we have methods to challenge consensus and ensure transparency in automation.

Automation is appealing, but we must remember that the data feeding these smart contracts is crucial. We need to find a balance between automation, transparency, and the ability to challenge decisions.

Vinay (CEO Mattereum) 58:25 – 58:59

We think of it as the ability to raise a legal dispute. If the data is bad, there should be identifiable damages and a contractual framework in place. As we build these standards, it’s important to ensure that the legal machinery is strong enough to handle disputes.

Shreya Berry (Host) 59:09 – 59:22

I think we’ve covered a lot of ground today. Any last thoughts from all of you? I think Edwin is facing some issues tuning into the spaces. But yeah, any last thoughts?

Ashish Sood (CTO Polytrade) 59:33 – 59:60

I just want to say it’s great that we’re having these discussions. While there’s a lot of chatter in the spaces, it’s important to come together with great minds and have these conversations. This is the 4th edition of our IRL Spaces, and I’m sure we’ll see some great results from these in the coming times. Thank you again to all the speakers. It was great to be with you on stage.

Shreya Berry (Host) 01:00:09 – 01:00:43

Thank you, Ashish. I’d also like to thank all our speakers and listeners for such a rich discussion today. Standardization of token formats is no small feat, but with collaboration and innovation, it’s definitely within reach. Don’t forget, we’ll be back on Friday at 6 PM GST with another exciting session. Let’s continue to push the boundaries of what’s possible with RWAs. Thanks again for being here today. It was lovely having you all.

Victor Sanchez (CEO Kinto) 01:00:45 – 01:00:51

Thank you very much for the time. Glad to participate. Thank you.

Learn About $TRADE

Listen to the full recording

RWA IRL: EP 4 – Standardization of Token Formats