Cardano Adds Programmable Token Standard for Regulated Assets
Cardano has merged CIP-113, a programmable-token standard, into its main improvement-proposal repository on September 29. The proposal is designed to add issuer-controlled transfer rules to native assets while preserving Cardano's extended unspent transaction output (eUTXO) model.
The Cardano Foundation has positioned programmable tokens as infrastructure for regulated financial assets, including stablecoins, securities, and real-world assets that may require transfer restrictions, freezes, and compliance controls. The framework could broaden Cardano's appeal to institutional issuers seeking these capabilities.
Matteo Coppola, chief executive officer of Fluid Tokens and a contributor to CIP-113, said the merge followed years of development and puts the framework in the hands of Cardano projects. However, CIP-113 remains in "Proposed" status and requires issuance on Preview and mainnet, end-to-end testing, and support from widely adopted wallets before becoming Active.
Cross-Asset Dependencies Create New Complexity
The standard introduces a structural challenge: on Cardano, transfer rules governing one programmable token can affect other assets bundled in the same transaction output. Under the eUTXO model, a single output can contain multiple tokens and ADA, and spending that output consumes it as a unit.
If an output contains restricted token A, unrelated token B, and ADA, a freeze or denylist rule on A can prevent the holder from spending that output to move B or the ADA, even though they are not independently restricted. Neither B nor the ADA has been frozen, but both become temporarily inaccessible because they share the same output.
Separation Mechanism Offers Partial Relief
CIP-113 provides a restructuring mechanism called "unfracking" to address this dependency. This process allows one token policy to be separated from the rest of an output without changing ownership, so restricted token A can be moved into its own output while B remains in another output controlled by the same holder.
However, the holder does not automatically control this separation. An unfracking transaction requires the holder's authorization and must satisfy the affected token's registered separation rules, which can require additional signatures, impose script-based conditions, or block restructuring entirely. If A's policy does not allow separation, B and the ADA sharing that output can remain inaccessible until relevant conditions change.
The proposal distinguishes between this kind of blockage and asset seizure. A token issuer's control over A does not give it ownership of B or other assets in the same output, and the reference implementation is designed to preserve balances belonging to unrelated token policies.
Implications for Wallets and DeFi Protocols
For wallets and DeFi applications, asset ownership alone may no longer determine immediate spendability. How tokens are grouped inside an output and what separation permissions each policy allows become part of the financial risk attached to holding or accepting them.
The CIP-113 reference implementation describes single-policy outputs as the preferred construction, though developers are not required to use this approach. Keeping programmable assets separate would reduce the risk that one issuer's compliance action prevents an unrelated token from moving.
ADA remains exposed to the same constraint. Cardano outputs containing tokens also carry ADA, meaning some of the network's native asset can become temporarily inaccessible when it shares an output with a restricted programmable token.
For DeFi lending protocols, the issue becomes a collateral-management risk. A platform accepting a programmable token would need to assess whether its issuer can freeze transfers, whether the protocol can authorize separation, and whether those controls could interfere with withdrawals or liquidations. A restriction arriving during market downturns could be particularly consequential if a lender cannot move collateral to close an undersecured position.
Market Expansion and Risk Pricing
These questions become more relevant as Cardano expands its stablecoin and tokenized-asset market. USDCx, backed one-for-one by USDC through Circle's xReserve infrastructure, has already added another source of dollar liquidity to the network.
CIP-113 could widen that market by giving prospective issuers the compliance controls required for regulated stablecoins, securities, and other tokenized assets while retaining Cardano's native-asset architecture. The cost is that wallets and DeFi protocols may have to treat an asset's permission structure as another layer of financial risk.
Wallet developers could segregate programmable policies by default, while lending protocols may impose lower collateral values, tighter parameters, or reject tokens whose freeze and separation rules create uncertainty around liquidation. As projects adopt CIP-113, their decisions on output construction and issuer permissions will help determine whether regulated assets can integrate into Cardano's DeFi markets or require protocols to price the risk that compliance controls could restrict access to collateral when needed.
