Cardano builds a freeze button for unissued stablecoins

The Cardano Foundation promotes compliance tools to support freezing and forfeiture of regulated tokens

The Cardano Foundation is preparing for a future when issuers of regulated tokens will be able to freeze or seize stablecoins, funds and bonds issued on the blockchain. This progress has been confirmed through compliance tools. According to Cardano officials, the tool was launched on the main network on Wednesday, allowing issuers to screen recipients and block sanctions wallets online.

Currently, the stablecoin market on Cardano (the sector that uses this feature most often) is relatively small, with a size of approximately US$67 million.

The CIP-0113 proposal comes into effect without a hard fork

According to the Cardano Foundation, a Swiss non-profit organization responsible for coordinating network development, its CIP-0113 Cardano improvement proposal announced at the TOKEN2049 meeting has been officially launched, and the entire process does not require a hard fork.

Can Cardano freeze tokens now?

CIP-0113 launched on Cardano this time is a compliance tool designed to implement the "token-driven" compliance logic. No matter how many times a token is transferred, the system continues to check whether it conforms to the rules set by the issuer.

Issuers can set multiple parameters, including identity verification and anti-money laundering (AML) checks, sanctions screening, transfer restrictions, and freezing and confiscation controls based on pre-built rule sets called modules. In addition, publishers can also write custom rules and change them at any time based on regulatory changes without having to modify the underlying standards.

In practice, whether it is transferring money, casting or destroying, Cardano's ledger will first check whether the transaction complies with the issuer's rules before approving the transaction. Transactions that do not meet the criteria will be rejected.

For restricted tokens, these restrictions only apply to a single application, but will follow the token transfer between wallets and services.

Frederik Gregaard, CEO of the Cardano Foundation, said: "Rules must move with assets and be enforced every time they are transferred."

Potential risks arising from the expansion of issuer power

The global power granted to token issuers by CIP-0113 also poses some challenges. For example, if issuers 'rules allow it, they can recover tokens from users' wallets without their consent. It is for this reason that the technical specifications specifically warn lending service providers to carefully verify whether the issuer has such rights when accepting tokens as collateral.

It is worth noting that according to the GitHub repository instructions implemented by Aiken, the "Freeze and Confiscation" feature is an optional regulatory compliance feature.

Cardano's stablecoin market is relatively small

Compared with platforms such as Ethereum, Solana and XRP Ledger that already have their own transfer control versions, Cardano's stablecoin market is relatively small. According to DeFiLlama, its size is approximately US$67.5 million.

Previously, Cardano was late to join the Coinbase x402 payment standard and did not add ADA support until September this year.

Responding to the call of international organizations to promote the development of programmable assets

CIP-0113 is Cardano's response to priority requests from the Bank for International Settlements (BIS) and the International Monetary Fund (IMF) to increase programmability and hard-code compliance into assets in the growing tokenized financial market.

The Swiss Capital Markets and Technology Association has affirmed the CIP-113 programmable asset token, arguing that its smart contract is equivalent to its CMTAT framework and can be used to certify the compliance of ledger-based equity securities that comply with Swiss standards.

Project Background and History

The history of this work is longer than this week's news headlines. The current implementation builds on the early reference design CIP-143, originally developed by Phil DiSarro and the IOG team, and subsequently migrated to the Aiken language.

As early as January 2025, Cardano founder Charles Hoskinson expressed strong interest in the proposal, viewing the freeze and forfeiture features as a tool for non-confrontational use, such as for asset recalls, identity updates and dividend payments. The foundation said a securities module specifically designed for regulated tools is still under development.