ERC-1404 is a standard for creating security tokens on the Ethereum blockchain. It was designed with input from issuers, securities law firms, and exchanges and allows shareholders to interoperate with the entire Ethereum ecosystem with added functionality that allows the Fund to enforce transfer restrictions within the share’s “smart-contract.”.
ERC-1404 is an open standard that neither requires an issuer to use TokenSoft products or services nor disqualifies them from employing another. The standard has a couple of key features, such as simple restricted token standard on Ethereum and design to allow participants to meet compliance requirements in the securities industry. In 2018, ERC-1404 was approved for use in a publicly-traded, SEC registered fund, which was the first time the SEC approved a token on a public blockchain.