According to the author of ERC-7943, institutions cannot play the ‘pirate game’ of Defin

For years, crypto has grown on speculative capital flows and the exploding popularity of decentralized finance (DeFi) tokens and applications.

That's true of ever-increasing areas like perpetual decentralized exchanges and prediction markets. But as Wall Street moves toward tokenized real-world values ​​(RWAs), not all of the industry's existing systems are up to the task of bringing financial products institutions up the chain.

The newly completed author ERC-7943 (URWA) Token Standard The decentralized infrastructure that powers most DeFi is not for regulated financial assets, which often require identity frameworks and interoperability standards.

“If you want to bring controlled assets onchain, you cannot escape the rules,” Dario Lo Buglio, co-founder and head of blockchain at tokenization platform Brickken, told Cointelegraph.

“You can still play your pirate game on DeFi without controlled assets.”

DeFi veterans have been wary of freezing functions in tokens, but similar controls appeal to institutions. Source: ethereum.org

The current standards do not cover every RWA use case.

Another level of simulation, ERC-3643 -also known as T-REX or Token for Control Exchanges – is one of the main frameworks used for tokenized securities on Ethereum.

The standard includes many subject-specific features such as identity-based permissions and mechanisms that allow providers to intervene in certain situations.

The framework is primarily designed around securities and doesn't necessarily translate to the broader range of token assets now entering blockchain markets, Lo Buglio said. Therefore, it is difficult to work together when many institutions try to chain traditional financial products.

“While rectification is becoming easier, the most difficult problem is making those assets work across multiple escrows, custodians, exchanges, wallets and institutional platforms,” ​​XYO co-founder Marcus Levine told Cointelegraph.

According to Levin, standards like uRWA will help standardize how tokenized assets carry information related to identity, permissions, compliance requirements and transfer rules in Ethereum-based systems.

“Done well, this makes it easy for each institution to move, validate and integrate without having to build its own infrastructure,” he said.

Tokenized RWAs It has grown from an estimated $6.4 billion to nearly $34 billion in early 2025, according to RWA.xyz. Standard Chartered Assumptions This value will rise to 2 trillion dollars by the end of 2028, according to the Boston Consulting Group Projects $18.9 trillion by 2033.

Total market capitalization is approaching $340 billion in metrics that classify stablecoins as RWAs. Source: RWA.xyz

Related: Wall Street's token boom has a liquidity problem: Axis CEO

Levine added that institutions prioritized assets with predictable cash flows, tangible production and established legal structures.

“The market is proving to benefit the most from fast settlement, programmable collateral and low operational friction.”

Privacy as the next institutional requirement

Privacy is another big hurdle for institutions experimenting with onchain finance, especially for firms that don't want to expose portfolio activity or transaction flows on public blockchains.

“We don't want BlackRock to publicly list their entire portfolio onchain for everyone, but they still want to trade onchain,” he said.

BlackRock's institutional liquid fund is worth about $2.5 billion. Source: RWA.xyz

Related: DeFi hacks shake institutional confidence because the risk is overproduction

Lo Buglio argued that many existing tokenization frameworks are initially designed around public Ethereum-based systems and do not always translate cleanly to privacy-oriented chains, where transaction models and data structures are often different from traditional EVM environments.

It was launched with support from organizations including Canton Network, Goldman Sachs, Microsoft and Cboe Global Markets around financial coordination while protecting privacy among institutions.

Unlike public blockchains such as public blockchains where transaction activity is widely visible across the network, Canton still allows the data to be visible only to relevant participants by synchronizing agreements between institutions.

Its architecture has angered some developers. Arguing that the network lacks key features associated with public blockchains, including a global common state.

The debate reflects a growing divide between crypto-native DeFi infrastructure and blockchain system types, with many large financial firms appearing more willing to adopt regulated assets.

AI agents can push RWAs beyond TradFi.

Much of the discussion around RWA centers on banks and institutional systems. But some developers believe that the infrastructure now being built for RWAs could eventually be extended to a machine-driven financial system.

“As AI agents begin to move capital autonomously, they're looking for on-chain assets that they can read and act on,” Taran Dillon, head of digital assets at the tokenization company, told Cointelegraph.

According to Dillon, many productive R&Bs are still disconnected from automated financial systems because they lack a standardized digital infrastructure.

“The standards that are currently being developed should work not only in the corridors of the established financial markets, but also across regions and asset classes,” he said.

Lo Bullio similarly argued that ERC-7943 was designed as a core implementation and framework that would allow tokenized assets to move across increasingly interconnected blockchain environments.

ERC-7943 moved to the “final” stage in Ethereum's update proposal process on Wednesday, meaning developers can deploy standard-level contracts without waiting for further specification changes. The next phase will likely focus on adoption of tokenized asset platforms.

The emergence of another token standard may not immediately solve the standardization problem it aims to solve.

Lo Buglio acknowledged that ERC-7943 was intentionally designed to be a more flexible and “non-opinionated” framework than some previous standards.

Large financial institutions and blockchain developers continue to experiment with proprietary infrastructure and custom compliance systems.

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