Cardano Adopts CIP-0113 Token Standard, Letting Issuers Freeze or Seize Regulated Assets

Cardano has introduced a new token standard that allows issuers of regulated assets such as stablecoins, funds and bonds to directly set the conditions for holding and transferring tokens.

CoinDesk reported on October 7 that the Cardano Foundation formally implemented Cardano Improvement Proposal CIP-0113 on the network after an independent security audit.

CIP-0113 is designed so the network checks rules set by issuers each time a token moves. Issuers can restrict which investors are allowed to receive tokens or block transfers to specific addresses. They can also enable functions to freeze or seize holdings when necessary.

For example, a fund open only to investors who have completed identity verification can prevent tokens from being transferred to unverified users. Stablecoin issuers can also restrict transfers to sanctioned addresses. Those conditions are enforced every time the token moves, even when users rely on different wallets or services.

The tokens are managed through Cardano's shared smart contracts, which verify during transaction validation whether the required conditions have been met. No separate hard fork was needed because the standard uses existing features of the Cardano network. Issuers can choose existing rules or create their own conditions, and they can revise them as regulations change.

"Rules must travel with the asset and be enforced every time the asset moves," Cardano Foundation Chief Executive Officer Frederik Gregaard said.

Depending on how the rules are configured, however, authorized parties may be granted the power to move tokens without the holder's consent. The technical specification therefore advises lending services to check what authority has been granted to issuers and others before accepting such tokens as collateral.

The Cardano Foundation said the new standard has also been recognized under the certification framework of the Capital Markets and Technology Association, or CMTA, in Switzerland. Meanwhile, Cardano's native token ADA fell 4.5% over the past 24 hours amid broader weakness in the crypto market.