Cardano Allows Token Issuers to Block, Seize, and Restrict Assets

The Cardano Foundation has launched the token standard CIP-0113, which allows issuers of regulated assets to restrict recipients and block, seize, or transfer assets based on specified rules.

The foundation has introduced a standard for tokens that enables issuers of stablecoins, funds, and bonds to determine who can receive their assets and to block or seize assets if required by regulations.

This foundation, a Swiss non-profit organization supporting the development of Cardano, announced on Wednesday that this standard, a Cardano Improvement Proposal known as CIP-0113, has now been operational on the network following independent security reviews.

Most cryptocurrency tokens can be sent by any holder to any wallet address; however, banks and fund managers offering regulated assets in an on-chain manner cannot grant such permissions.

They are required to keep these tokens away from buyers who are not verified and from sanctioned addresses, and they must be able to block assets if ordered by a regulatory body or court.

The new standard integrates these regulatory mechanisms into the token's structure, so that the network validates compliance with the rules before confirming and finalizing any transfer.

For example, a fund sold exclusively to verified investors can rely on this standard to reject a token transfer to an unverified individual. A stablecoin issuer can also prevent their tokens from reaching a sanctioned address. These restrictions remain in effect and are enforced with every token transfer, even among users with different wallets or services.

This mechanism keeps tokens in a shared smart contract and operates on Cardano, which controls their transfer paths and conditions. Network nodes implement and verify the established rules before confirming any transaction. This process leverages Cardano's existing capabilities and does not require a hard fork.

Frederik Gregaard, CEO of the Cardano Foundation, stated in a statement:

"Rules must move with the asset and be enforced with each transfer."

Issuers can choose from a set of pre-defined rules or write their own specific terms and update them as regulations change. The Cardano Foundation listed Eternl and GeroWallet wallets, the CardanoScan blockchain explorer, and the BloxBean development tools provider among the services participating in this launch.

Other blockchains have also implemented similar models; Ethereum has permissioned token standards like ERC-3643, Solana provides transfer control through Token Extensions, and the XRP Ledger supports tokens that allow issuers to restrict recipients or reclaim balances (Clawback).

Holding these types of tokens may imply accepting powers beyond simple blocking of a payment; depending on the token's rules, an authorized entity may even move assets without the holder's consent. The technical documents of this proposal recommend that lending platforms carefully evaluate these structural powers before accepting such tokens as collateral.

The foundation also announced compliance with the certification framework of the Capital Market and Technology Association (CMTA), a Swiss specialized entity whose standards form the basis for the issuance of tokenized shares.

Amid a general decline in the cryptocurrency market, Cardano's ADA token has faced a 4.5% price drop in the past 24 hours.

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