A Regulatory Compliance Protocol for Asset Interoperability Between Traditional and Decentralized Finance in Tokenized Capital Markets

TL;DR

This paper introduces the Regulatory Compliance Protocol (RCP), a standardized framework based on global financial regulations to enhance interoperability and compliance in asset tokenization across traditional and decentralized finance.

Contribution

The paper presents RCP, a comprehensive regulatory standard for asset tokenization, validated through scenarios and a new ERC protocol demonstrating improved performance.

Findings

RCP covers 31 regulatory items across five key groups.

Validation shows RCP's superiority over existing ERC protocols.

RCP facilitates compliant asset interoperability in tokenized markets.

Abstract

There have been various attempts at token standards on numerous blockchain platforms today to fundamentally change the way assets are traded in the traditional capital markets, but there is a lack of research and resolution on regulatory issues that become the common foundation for interoperability and reusable standards. Our proposal, Regulatory Compliance Protocol (RCP), is based on the regulations and reports of 15 global financial institutions and standardizes recommendations and guidelines involving the overall asset tokenization of TradFi and DeFi into five regulatory groups: Traceability, Confidentiality, Enforceability, Finality and Tokenizability, compiling them into 31 items and presenting a benchmark for technology and standards as an underlying protocol. To review the legality and effectiveness of RCP, it was validated based on three tokenization and trading scenarios, and through the RCP-based NEW-EIP, it showed superiority over other ERC protocols related to asset tokenization.