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ADA Cardano Foundation launches compliance toolkit to support freezing and confiscation of regulated tokens
The Cardano Foundation has released a new compliance toolkit that allows issuers of regulated tokens to freeze or confiscate assets such as stablecoins, funds and bonds issued based on the Cardano blockchain. The move aims to align Cardano's infrastructure with evolving regulations and strengthen on-chain control of tokenized assets.
Compliance toolkit officially launched on the Cardano Mainnet
The Swiss-based Cardano Foundation, which manages and promotes the development of the Cardano blockchain, confirmed that a new toolkit based on CIP-0113 (Cardano Improvement Proposal) has been launched on the Mainnet. This implementation eliminates the need for a hard fork, simplifying the deployment process.
This toolkit allows asset issuers to screen transaction recipients and block wallet addresses subject to regulatory sanctions. Through pre-built modules or customized rules, parameters such as identity verification, anti-money laundering inspections, and freezing and confiscation controls can be customized. As regulations change, issuers can update these settings without changing the underlying token standard.
Whenever a transaction such as casting, destruction, or transfer is initiated, the Cardano ledger checks whether it complies with the issuer's rules before approving it. Transactions that do not meet the criteria will be automatically rejected. Frederik Gregaard, CEO of the Cardano Foundation, pointed out that asset rules "must move with the assets and be enforced every time they are transferred."
The restrictions imposed on tokens are not limited to single applications; they are enforced in wallets and services, ensuring consistent compliance as tokens move within the ecosystem. However, this extended supervision can also pose challenges. If the issuer's rules allow it, tokens can be withdrawn from the user's wallet without their consent. CIP-0113 's technical documentation warns lending services to verify the authority of the token issuer before accepting assets as collateral.
According to Aiken's official implementation repository, the "freeze and confiscation" feature is still optional, allowing issuers to choose whether to enable these compliance features.
Small Dictionary: Cardano Foundation
The Cardano Foundation is a Swiss non-profit organization that supports and promotes the decentralized Cardano blockchain network, focusing on promoting the adoption and regulatory compliance of blockchain-based assets.
Current status of stablecoins and programmable assets
Despite new compliance capabilities, Cardano's stablecoins market is still small compared to similar projects. According to DeFiLlama, the stablecoin sector on Cardano is currently approximately US$67.5 million.
Cardano only added support for the Coinbase x402 payment standard in September, highlighting its relatively late entry into the widely used digital asset payment protocol.
The Cardano Foundation has positioned the CIP-0113 toolkit as a solution to global regulatory guidelines, such as requirements from the Bank for International Settlements (BIS) and the International Monetary Fund (IMF). Both organizations are calling for the introduction of programmability in tokenized finance to enable embedded compliance capabilities.
The Swiss Capital Markets and Technology Association has recognized the CIP-113 programmable asset token as compliant with the Swiss compliance framework, confirming its usefulness in certifying digital equity securities.
Technical and Regulatory Background
The technology of the compliance toolkit is based on early Cardano development work, in particular the CIP-143 reference design proposed by Phil DiSarro and the IOG team, which is now implemented in the Aiken smart contract language.
Cardano founder Charles Hoskinson has previously stated that in addition to being used for law enforcement, the freeze and confiscation features can also help non-confrontational applications such as asset recalls, identity updates and dividend payments. The Cardano Foundation said a dedicated securities module for regulated financial instruments is still under development.
