diff --git a/contracts/stellar-id/src/lib.rs b/contracts/stellar-id/src/lib.rs
index c1d8015..d92e028 100644
--- a/contracts/stellar-id/src/lib.rs
+++ b/contracts/stellar-id/src/lib.rs
@@ -115,6 +115,19 @@ pub struct MultiSigCredentialRequest {
     pub expires_at: u64,
 }
 
+/// A pending credential transfer request.
+///
+/// Allows a subject to propose transferring a credential to a new address.
+/// The original issuer must approve the transfer before it executes.
+#[contracttype]
+#[derive(Clone, Debug)]
+pub struct TransferRequest {
+    pub credential_id: u64,
+    pub from: Address,
+    pub to: Address,
+    pub requested_at: u64,
+}
+
 /// Storage keys
 #[contracttype]
 pub enum DataKey {
@@ -983,6 +996,193 @@ impl StellarIdContract {
         );
     }
 
+    /// Proposes a credential transfer from the subject's current address to a new address.
+    ///
+    /// The `subject` address must authorize the call and must be the current owner
+    /// of `credential_id`. A transfer request is stored, pending approval by the
+    /// original issuer.
+    ///
+    /// Panics if `subject` does not authorize the call, `credential_id` does not
+    /// exist, `subject` is not the credential owner, or a transfer request already
+    /// exists for this credential.
+    pub fn propose_transfer(env: Env, subject: Address, credential_id: u64, new_address: Address) {
+        subject.require_auth();
+
+        let credential: Credential = env
+            .storage()
+            .persistent()
+            .get(&DataKey::Credential(credential_id))
+            .expect("Credential not found");
+
+        assert!(
+            credential.subject == subject,
+            "Only the credential subject can propose transfer"
+        );
+
+        // Check no existing transfer request
+        let existing: Option<TransferRequest> = env
+            .storage()
+            .persistent()
+            .get(&DataKey::TransferRequest(credential_id));
+        assert!(existing.is_none(), "Transfer request already exists");
+
+        let now = env.ledger().timestamp();
+        let request = TransferRequest {
+            credential_id,
+            from: subject.clone(),
+            to: new_address.clone(),
+            requested_at: now,
+        };
+
+        env.storage()
+            .persistent()
+            .set(&DataKey::TransferRequest(credential_id), &request);
+
+        env.events().publish(
+            (Symbol::new(&env, "credential_transfer_proposed"),),
+            (credential_id, subject, new_address),
+        );
+    }
+
+    /// Approves and executes a credential transfer proposed by the subject.
+    ///
+    /// The `issuer` address must authorize the call and must be the original issuer
+    /// of `credential_id`. The credential's subject field is updated to the new
+    /// address, and both the old and new subject's credential lists and identity
+    /// records are updated accordingly.
+    ///
+    /// Panics if `issuer` does not authorize the call, `credential_id` does not
+    /// exist, `issuer` is not the original issuer, no transfer request exists, or
+    /// the transfer request has been tampered with.
+    pub fn approve_transfer(env: Env, issuer: Address, credential_id: u64) {
+        issuer.require_auth();
+
+        let mut credential: Credential = env
+            .storage()
+            .persistent()
+            .get(&DataKey::Credential(credential_id))
+            .expect("Credential not found");
+
+        assert!(
+            credential.issuer == issuer,
+            "Only the original issuer can approve transfer"
+        );
+
+        let request: TransferRequest = env
+            .storage()
+            .persistent()
+            .get(&DataKey::TransferRequest(credential_id))
+            .expect("Transfer request not found");
+
+        // Verify the request matches the current credential state
+        assert!(
+            request.credential_id == credential_id,
+            "Transfer request credential ID mismatch"
+        );
+        assert!(
+            request.from == credential.subject,
+            "Transfer request from address mismatch"
+        );
+
+        let old_subject = credential.subject.clone();
+        let new_subject = request.to.clone();
+
+        // Update credential subject
+        credential.subject = new_subject.clone();
+        env.storage()
+            .persistent()
+            .set(&DataKey::Credential(credential_id), &credential);
+
+        // Remove credential ID from old subject's list
+        let mut old_subject_creds: Vec<u64> = env
+            .storage()
+            .persistent()
+            .get(&DataKey::SubjectCredentials(old_subject.clone()))
+            .expect("Old subject credentials not found");
+        let old_index = old_subject_creds
+            .iter()
+            .position(|id| id == credential_id)
+            .expect("Credential ID not in old subject's list");
+        old_subject_creds.remove(old_index as u32);
+        if old_subject_creds.is_empty() {
+            env.storage()
+                .persistent()
+                .remove(&DataKey::SubjectCredentials(old_subject.clone()));
+        } else {
+            env.storage()
+                .persistent()
+                .set(&DataKey::SubjectCredentials(old_subject.clone()), &old_subject_creds);
+        }
+
+        // Add credential ID to new subject's list
+        let mut new_subject_creds: Vec<u64> = env
+            .storage()
+            .persistent()
+            .get(&DataKey::SubjectCredentials(new_subject.clone()))
+            .unwrap_or(Vec::new(&env));
+        new_subject_creds.push_back(credential_id);
+        env.storage().persistent().set(
+            &DataKey::SubjectCredentials(new_subject.clone()),
+            &new_subject_creds,
+        );
+
+        // Update old subject's identity
+        let mut old_identity: Identity = env
+            .storage()
+            .persistent()
+            .get(&DataKey::Identity(old_subject.clone()))
+            .expect("Old subject identity not found");
+        old_identity.credential_count -= 1;
+        let issuer_record: Issuer = env
+            .storage()
+            .persistent()
+            .get(&DataKey::Issuer(issuer.clone()))
+            .expect("Issuer not found");
+        old_identity.reputation_score =
+            Self::compute_reputation(old_identity.credential_count, issuer_record.trust_level);
+        if old_identity.credential_count == 0 {
+            env.storage()
+                .persistent()
+                .remove(&DataKey::Identity(old_subject.clone()));
+        } else {
+            env.storage()
+                .persistent()
+                .set(&DataKey::Identity(old_subject.clone()), &old_identity);
+        }
+
+        // Update new subject's identity
+        let existing_new_identity: Option<Identity> = env
+            .storage()
+            .persistent()
+            .get(&DataKey::Identity(new_subject.clone()));
+        let new_identity = if let Some(mut id) = existing_new_identity {
+            id.credential_count += 1;
+            id.reputation_score =
+                Self::compute_reputation(id.credential_count, issuer_record.trust_level);
+            id
+        } else {
+            Identity {
+                subject: new_subject.clone(),
+                credential_count: 1,
+                reputation_score: issuer_record.trust_level / 10,
+                created_at: env.ledger().timestamp(),
+            }
+        };
+        env.storage()
+            .persistent()
+            .set(&DataKey::Identity(new_subject.clone()), &new_identity);
+
+        // Remove the transfer request
+        env.storage()
+            .persistent()
+            .remove(&DataKey::TransferRequest(credential_id));
+
+        env.events().publish(
+            (Symbol::new(&env, "credential_transfer_approved"),),
+            (credential_id, old_subject, new_subject, issuer),
+        );
+    }
+
     // --------------------------------------------------------
     // Query Functions
     // --------------------------------------------------------
@@ -2942,8 +3142,6 @@ mod tests {
         let issuers = register_n_issuers(&env, &client, &admin, 2);
         let schema_id = register_schema_helper(&env, &client, &issuers.get(0).unwrap());
         let subject = Address::generate(&env);
-
-        // threshold 3 > 2 issuers
         client.create_multisig_request(
             &issuers.get(0).unwrap(),
             &subject,