Ethereum draft adds compliance controls for confidential RWA tokens

The Defiant reports on a new Ethereum improvement draft proposing compliance controls for confidential real-world asset (RWA) tokens. Pull request #2034 was submitted on Thursday evening ET and is currently an unmerged draft.

The proposal builds on ERC-7984, a draft standard that stores balance data as hidden pointers instead of visible figures. It modifies the finalized ERC-7943 RWA standard, which currently specifies eligibility rules, freezing mechanisms, and forced transfer capabilities for standard tokens, to keep compliance decisions based on transfer amounts private.

Under the draft, applications can publicly verify if an address has the right to send or receive tokens, while checking specific transfer details and spendable balances through confidential outputs. An authorized party can compel a transfer without the holder’s agreement, as long as the recipient is eligible. The proposal does not require a specific cryptographic system or assign responsibility for resolving pointers, leaving those choices to implementers.

Cuy Sheffield, Visa’s head of crypto, said the work targets settlement requiring "both programmability and privacy controls."

The draft advises applications to move zero tokens if a transfer fails compliance checks, rather than reverting the transaction, since a public error can reveal balance data. This method requires applications to verify the actual amount moved, rather than assuming payment occurred because the transaction succeeded. Another open proposal, PR #1850, uses a different approach by depending on a specific notary to verify private transactions.