Abstract
This standard is an extension of ERC-7551 / Magicians: (Draft EIP (ERC-7551): Crypto Security Token Smart Contract Interface ("eWpG")). While ERC-7551 defines a compliant transfer, freezing of securities, enforced transfers by operators and machine readable properties of the issuance itself, this standard addresses the additional regulatory requirements according to the German Electronic Security Act (eWpG) in terms of confidentiality and transparency of the legal status of a security.
As no current approved standard is supporting the full set of demanded functionality, this standard shall, as an extension of ERC-7551, enable the industry to build applications relying on a fully compliant On-Chain register for securities.
Additionally to the requirements covered in ERC-7551, this standard seeks to fulfil:
Privacy of Balances
The Smart Contract must check, if the wallet that is calling the report function, is eligible to get the Balance of a given wallet.
Full descriptive Report of Balances
The smart contract must provide a full set of properties along with the Balance as ruled out in the law.
Support of different legal statuses of a security
The smart contract must support different statuses of a security and enable transfer restrictions according to certain statuses. This is done by an approach based on ERC-1155.
Motivation
The German Electronic Security Act aims to be agnostic to the technology that is used to build a Crypto Security Register according to its §16. Although EVM intentionally was designed to be public and permissionless on the level of the blockchain as well as on the level of smart contracts, the regulated market could benefit from the flexibility that come with smart contracts and the potentials that come with a potential combination of securities and utilities.
To overcome the monopole of the Central Securities Depository in traditional finance, there must be a reliable standard that is addressing the regulatory demands for crypto securities.
Additionally, the implementation should embed as much regulation as possible into the smart contract to prevent the rise of siloed solutions developed by each regulated crypto registrar. This enables the different players in the market to integrate these securities in their trading platforms and exchanges independent from the regulated registrar that is managing them.
Under these prerequisites, a security standard should not only address the restrictions based on KYC and AML rules but should also address the dimensions of privacy as well as transparency in terms of completeness of information about the properties and the legal status of a security.
This leads to the following requirements.
Please follow the technical requirements and details on GitHub: