Zama, a French cryptography startup, is integrating its encryption protocol with T-REX Ledger, a platform backed by Apex, to introduce a confidentiality layer for tokenized assets built on the ERC-3643 standard. ERC-3643 allows issuers to embed identity verification and transfer restrictions directly into tokenized securities. The move is designed to make confidentiality a core component of tokenized asset infrastructure rather than an optional feature added on top of existing systems. Zama raised $73 million in a Series A funding round in 2024 to commercialize fully homomorphic encryption, known as FHE.
The two companies say the integration will allow regulated institutions to operate on public blockchain networks without exposing sensitive position and transaction data. This concern has been a significant barrier to broader institutional adoption of public networks for regulated assets. T-REX Ledger is described as a neutral infrastructure layer built around ERC-3643, where identity verification and rules-based compliance are embedded in smart contracts, while underlying Know Your Customer data remains offchain.
Zama founder Rand Hindi explained that institutions using T-REX would be able to wrap existing ERC-3643 tokens into confidential equivalents, preserving balances on a one-to-one basis while encrypting future transfers and resulting balances end-to-end. This process, which Hindi referred to as “shielding,” would also allow issuers to keep parameters such as interest rates, withholding taxes, and liquidation thresholds confidential while operating on public infrastructure. Hindi argued the approach removes the traditional trade-off between regulatory compliance and confidentiality by combining both within shared, programmable infrastructure.
The announcement arrives as the broader industry debates how institutions should manage privacy and interoperability on public blockchains, with zero-knowledge systems, permissioned networks, and FHE all competing for a role in the tokenization stack. Matter Labs CEO Alex Gluchowski told reporters that zero-knowledge systems such as zkSync‘s Prividium were the only way enterprises could achieve genuine privacy and onchain interoperability, especially when private environments need to settle transactions atomically via Ethereum and other ZK domains. He noted that ZK proofs allow institutions to confirm transaction validity without revealing underlying data, while anchoring security to Ethereum’s base layer.
Digital Asset co-founder Shaul Kfir offered a contrasting view, arguing that zero-knowledge technology is not necessary for most real-world asset use cases. He said Canton‘s permissioned architecture already delivers privacy and interoperability without requiring every participant to validate every transaction. Kfir also cautioned that cryptographic guarantees cannot substitute for legal enforceability, pointing to onchain security incidents as evidence that institutional systems still depend on legal frameworks to resolve disputes over user intent.
Hindi positioned FHE as complementary to both zero-knowledge and permissioned approaches, arguing it addresses what he described as the shared state problem that limits both ZK systems and Canton. FHE, he said, allows a network to perform shared computations over encrypted data from multiple users simultaneously, rather than hiding data by restricting access or requiring each user to independently prove their own state. This, he contended, makes it feasible to implement workflows such as confidential compliant decentralized finance operations or daily regulatory threshold checks on public infrastructure.
Hindi acknowledged that the encryption and decryption process introduces a few seconds of additional latency but said it does not affect T-REX’s underlying throughput or its composability with public blockchain networks. The integration reflects a growing effort among infrastructure providers to reconcile institutional privacy requirements with the transparency and accessibility of public blockchain rails. How regulators and institutions ultimately respond to these competing technical approaches is expected to shape the direction of the tokenized asset market in the coming years.
Originally reported by CoinTelegraph.
