Inventing the next generation of transactional, investment and exchange products for emerging tokenised banking models. 01 December 2019 TOKENISED DEPOSIT ECOSYSTEMS THE VISION CREDIBLE CAPITAL MARKETS At XAR we believe that tokenisation and DLT is driving unprecedented innovation in the future of capital markets, creating opportunities for new stakeholders to participate around the globe. The entrant of new players in the market, together with largely unregulated innovation, creates opportunities for malicious and / or ignorant parties to prejudice investors – because proper care is rarely taken to ensure an issued token can be redeemed fairly for the underlying value – and private entities issuing such tokens aren’t regulated effectively. We work closely with licensed and regulated institutions to help them tokenise assets – ranging from fiat, equity, debt, commodities and other tokens – in such a way that off-takers can have full confidence in eventual settlement of value. This approach requires oversight and participation of regulators and central banks, which we believe is the best way to ensure the integrity of tokenised markets. BLOCKCHAIN - WHAT IS IT GOOD FOR? THE BENEFITS OF BLOCKCHAIN TO INSTITUTIONS Blockchain thrives in workflows where verification is required to ensure parties that a system is functioning as intended or promised and that no party is being prejudiced or advantaged unfairly. By providing a transparent and independently verifiable record, the DLT delivers irrefutable proof of transaction. In scenarios where a system is new or unknown to users, this provides additional confidence for adoption, and this is as applicable in systems with a central party or intermediaries, as it is in disintermediated scenarios. Blockchain value is unlocked in applications where verifiability is an important system value to participating parties which provides significant advances in implementing banking ledger and auditing systems for example. Furthermore it delivers substantial improvements for the development and implementation of multi-party transactions such as where banks collaborate on solutions, or in cross border / global trade, multi-party custodian accounts, and even peer to peer trades. WHY NOT JUST A STABLE COIN? BESPOKE BLOCKCHAIN FOR INSTITUTIONAL ADOPTION For institutions to freely embrace the advantages of blockchain, the technology must be considered objectively from a perspective of licensed banking activities that adhere to regulatory oversight and compliance requirements. While most of the popular global applications of blockchain in alternate financial markets were designed in direct opposition to institutional markets, blockchain technology is an impartial methodology that is readily leveraged for a wide range of application – for the benefit of institutions. This is the key difference of a tokenised deposit ecosystem approach – start with a framework of fiat deposits within the existing financial industry, and then build out on that to leverage the new solutions for customers within the regulated financial market that can be deployed through blockchain technology. This tokenised deposit ecosystem approach is our solution to embrace both Centralisation and Decentralisation where appropriate to create solutions that scale between censorship resistance for global trade through to managed custodianship at local commerce levels. BENEFITS TO A TOKENISED DEPOSIT ECOSYSTEM 1. STABLE COINS FOR COMMERCIAL BANKS: • Increases your Bank’s FIAT Deposits (Liquidity) by attracting customer funds. • Offers customers’ new utility on funds (Transacting) • Provides new savings products (Fixed Term / Call Accounts) • Excellent Application for Securitisation (Collateralisation) • Platform from which to launch Sharia Compliant Banking Products • Deterministic Platform provides for alternate lending models • Readiness for Central Bank Digital Currency • Commercial Bank Stable Tokens / Coins platform integration with CBDC • Commercial Bank money as well as Coin and Note on and off-ramp to CBDC • Retail Infrastructure and Support to facilitate KYC, Customer on-boarding of CBDC BENEFITS TO A TOKENISED DEPOSIT ECOSYSTEM 2. TOKENISED MARKETS FOR INVESTMENT BANKS: • Primary Debt & Equity Markets covering: Issuance, Book Building, Auction, Interest Payment, and Term Renegotiations • Secondary Debt & Equity Spot Markets • Alternative (Stable) Token Market i.e. Gold, Silver, Platinum, Diamonds, Oil, and more • Tokenised P2P Synthetic Futures No exportation of value, capital flight, or BoP requirements: • Forex Futures (Hedging / Cover) Markets • Global Shares and/or Commodity Futures Markets • Carbon Credit / Green Energy Futures Markets • Equity Futures Markets BENEFITS TO A TOKENISED DEPOSIT ECOSYSTEM 3. DIGITAL CURRENCY FOR CENTRAL BANKS: • Net Interbank Settlements • Treasury Notes, Bills and Bonds Management • Foreign Stable Token Exchange • Diaspora Payments vs Localbitcoins/Paxful (SDA BoP / Excon compliance) • B2B Cross Border Payments vs Transferwise (Business / FIA BoP / Excon compliance) • Mass Market Digital Currency • Unbanked an Underbanked Accounts (inclusion in Digital Currency) • Remittance of Social Grants, GEPF, RAF, NHI, etc • Point of Sale / Retail Payments • Economic Relief Programs (i.e. daily subsidy on limited volume of survival goods per person) XAR NETWORK’S TOKENISED DEPOSIT ECOSYSTEM PUBLIC PERMISSIONED TOKEN ECOSYSTEM DEPOSIT MANAGEMENT Security and transparency are guaranteed through oversight by the central bank and compliance with regulatory bodies. • Centralising user account, KYC and verification information. IDENTITY SMART & CUSTODY ACCOUNTS • Deposit Management by Banking Licensed Entities to ensure FIAT can be deployed with FRB for maximum yield. • Transactional Monitoring for FIC compliance with Freeze / Unfreeze and other features to ensure AML compliance. • Banking and Blockchain hybrid products to leverage the best of both TOKENISED ISSUANCE worlds. TRANSACTING UTILITY & AUCTION DEPOSITS • Collateralised Tokens with Regulated bridges to external digital markets for multi-bank, regional and global trade. • Integrated Capital Markets Platform with configurable rights for debt / equity token holders to exercise votes, etc. • Peer to Peer Secondary Markets for debt/equity/asset, or green markets, PEER TO PEER CSDT INTERCHANGE or synthetic derivative trading. TRADING XAR NETWORK’S CSDT INTERCHANGE Facilitating multi-bank, multi-country, and global trade with independence XAR NETWORK AUTHORITY OPTIONS PUBLIC PERMISSIONED PUBLIC PERMISSIONLESS This is XAR’s recommended platform for the issuance of The XAR Network provides a platform, completely decentralised CBDC and Commercial Bank Stable Coins, as well as and trust-less, for interactions between global players on an Regional Trade Networks. equal footing. Fully censorship resistant, it ensures that no player is prejudiced in transactions on this chain. National Regulators and Central Banks require ability to regulate transactions, forex trade, and securities issuances Nation States are able to engage in Global Trade without the GLOBAL REGIONAL within region to maintain FIAT price stability, raise national need for a trusted intermediary (reserve currency) and establish debt from Global Markets, and manage economic growth. deterministic contracts with investors and investments directly. Regional Trade Networks can further establish cross In such an environment, new products and protocols for global border trade ecosystems that are governed by mutually banking can deliver the financial tools for Nations to maintain NATIONAL accepted terms set by the respective central banks. economic independence while participating in global markets. PRIVATE Therefore National Network are governed by the National An examples of such a tool is CSDT (Collateralised Stable Debt Central Bank, and the Regional Networks collectively Token), providing guaranteed value for trade and investment governed by the respective regional Central Banks, who in without inflationary risk which is used to economically stabilise each case invite / reject new parties. and secure XAR Network’s node staking and validation model. PRIVATE PERMISSIONED We implement this authority structure for applications operating within a closed group of participants, applicable to This infinitely adaptable model drives the Decentralised Finance regulated industry bodies within a region. products that can empower Nation States to trade with certainty and confidence. Each party to the platform is able to inspect and verify that transactions correlate to their own records and ensure integrity of the ledger, whilst a regulatory body maintains control over who can participate in the network, and view transactions. XAR NETWORK CSDT - MULTI-BANK ISSUE & INTERBANK SETTLEMENT ESTABLISHING NATIONAL NETWORKS CENTRAL BANK Start with a commercial bank issue a debt token to tokenise FIAT Deposits, Balance Sheet Debt or DEBT TOKEN Assets as applicable. BANK 6 ZAR BANK 1 ZAR DEBT Next invite the local Central Bank to run a validator node on the network, and issue their own DEBT TOKEN TOKEN Central Bank Token. Now, using the XAR Network CSDT model, we collateralise the Bank and Central Bank Tokens to issue CSDT pegged to the ZAR, with a 1:1 valuation ratio and the liquidation ratio set to 100% for ZAR FIAT if FIAT or variable risk managed ratios if an Asset. BANK 5 ZAR CSDT BANK 2 ZAR DEBT This allows for trade (or interbank settlement) with the ZAR CSDT by any party on the network, and TOKEN DEBT TOKEN ability for holder of ZAR CSDT to redeem for the underlying collateral (either Bank Debt / Asset), with automated markets to swop Central CSDT for Bank CSDT or Debt- for Asset-CSDT. The model is easily expanded to invite other Bank Issuers to issue their Token, with the Central BANK 4 ZAR DEBT BANK 3 ZAR DEBT Bank approving such additional Bank tokens as collateral for ZAR CSDT with a liquidation ratio TOKEN TOKEN awarded based on respective Issuing Bank’s credit rating to ensure reckless banks destabilise the backed value of ZAR CSDT. In the event that a Bank exceeds it’s liquidation ratio, any of the Banks can buy out the liquidated Bank’s collateral at a pre-set auction penalty %, governed by the Central Bank. XAR NETWORK CSDT - MULTI-CURRENCY TRANSACTIONS ESTABLISHING REGIONAL TRADE NETWORKS ZAR CENTRAL BANK Start with the same Bank and Central Bank Debt or Asset tokens explained in the DEBT TOKEN NATIONAL Network example (now on a new network). BANK 6 ZIM BANK 1 ZAR DEBT Add the Central Bank (or Banks) of other National Regions to run validator node(s) on the DEBT TOKEN TOKEN regional network, and issue their own respective Central Bank Debt or Asset Token(s). Extending the XAR Network National CSDT model, we collateralise the respective Bank / Central Bank Debt / Asset Tokens to issue ZAR-ZIM CSDT pegged to an index agreed to between the various Central Banks, with valuation ratios set based on the respective ZAR-ZIM Central Bank’s FIAT exchange rates to the index, and liquidation ratio’s based on volatility BANK 5 ZAR CSDT BANK 2 ZAR DEBT TOKEN ratios. DEBT TOKEN This allows for regional trade with the ZAR-ZIM CSDT by any party on the network, and ability for holder of ZAR-ZIM CSDT to redeem for the underlying collateral (either ZIM or ZAR Debt or Asset), with auto-markets to swop for liquidity. ZIM CENTRAL BANK BANK 3 ZAR DEBT DEBT TOKEN TOKEN Expand again by inviting other Bank Issuers to issue their Debt or Asset Tokens, with the joint Central Bank approving such additional Bank tokens as collateral for ZIM-ZAR CSDT with a liquidation ratio awarded based on respective Issuing Bank’s credit rating and currency to ensure reckless banks don’t destabilise the backed value of ZIM-ZAR CSDT. XAR NETWORK CSDT FOR REGIONAL TRADE REGIONAL TRADE NETWORKS In order to ensure that each National Market maintains it’s own sovereignty we advise each Nation to first establish their own National Network within which they can regulate the minting of FIAT, Balance Sheet Debt, or Asset (like Precious Metals or Stones, Minerals or even Commodities) backed tokens for use within their local markets. Once established locally, we further advise Central Banks to regulate bridging value between National and other Networks to implement exchange controls and BoP reports. XAR Network’s innovative CSDT model however does not require parties to bridge tokens from one GLOBAL REGIONAL network to another, but rather collateralises tokens on the national network to be used as backing for issue of CSDT on the Regional Network. Through OpenMarket platforms, traders are able to exchange one CSDT (with it’s respective collateral) for another, to ensure they are able to liquidate on the desired network with the desired NATIONAL asset or debt token when exiting value. PRIVATE This ensures that all exportation of value is done through regulated protocols and that the respective Central Banks maintain full visibility and ultimate control of foreign trade. The same principals apply for trade on Global Networks from both National and Regional Networks. XAR NETWORK PLATFORM OVERVIEW Benefits and applications of the key platform modules SOLUTION OVERVIEW TOKENISED DEPOSITS SMART ISSUANCE DEPOSIT MANAGEMENT ACCOUNTS & AUCTION IDENTITY TRANSACTING UTILITY CSDT INTERCHANGE PEER TO PEER TRADING & CUSTODY CENTRALISE IDENTITY & CUSTODY FOR COMPLIANCE & AML IDENTITY & CUSTODY Through Centralised User Identity Validation, the platform ensures that the Bank owns the client record and maintains ultimate control over private keys in a secure and encrypted custody platform. TOKENISED • Online Corporate Or Individual User Registration Process DEPOSITS • Instant Account Creation with Data Security & Encryption • Single Sign-On Service for all Ecosystem Applications • Log in once with the same Profile for all applications • Online KYC Submission Process & Status Update • Corporate and Individual KYC Document Submission and Verification process • Real-time User Desirability Report and Account Validation • Track negative and positive account association and validate user status • Private Key Custody Service with User Authorised Transaction Signing • Enterprise KMS ensures keys aren’t lost and each transaction is user authorised MANAGE FIAT-TO-TOKEN PARITY WITH TRANSPARENCY DEPOSIT MANAGEMENT Realtime FIAT to Token Ledgering and Management Platform that integrates with existing bank treasury system via MQ and API: TOKENISED • Reduced FIAT Withdrawal Frequency DEPOSITS • Security and Transacting Utility of Tokens increases deposit lifetime • Better Fractional Reserve Banking Yields • Greater deposits and lower withdrawal frequency allow for tactical investment of deposit • Realtime Verified 1:1 FIAT to Token Parity • Transparent parity validation by means of treasury FIAT balance and token issue count • Attract Foreign Currency Deposits • Offer international investors security and verification, and potentially better returns • Retail CBDC Distribution Gateway • Support CBDC by providing Commercial Bank money and coin / note on-off ramps EXTEND ACCOUNTS WITH NEW TRANSACTING FEATURES TRANSACTING UTILITY Immutable Transacting with Deterministic Controls: • Instant Verified Transactions TOKENISED DEPOSITS • Verified Decentralised Consensus on Transactional Finality within 1 second • Request Payment (Permissioned Debits) • Alternate to Debit Order / Charge-Back challenges facing the industry • Escrow Transactions (Deposit, Future, Lock) • Escrow value on time locked or external (oracle) inputs for various applications • Retail CBDC Infrastructure Support • Exchange CBDC <> Commercial Bank FIAT Token via native CSDT or chain bridges • Net Interbank Settlement Solution • Collateralise Commercial Bank FIAT Token for CSDT for interbank settlements CREATE NEW ACCOUNT PRODUCTS FOR NEW MARKETS SMART ACCOUNTS Multi-user, Special Purpose, Trading and Savings Accounts: • Retail Loyalty Integration with Wallet TOKENISED DEPOSITS • Facilitate Discounted Retail transactions from Token Wallet as alternate to loyalty points • Multi-User (Communal) Savings Wallet (SACCO/Stokvel) • User Verifiable Deposits and Multi-Administrator/Treasurer roles (Multi-sig Auth) • Foreign Investor Savings Wallet • Real-time validated FIAT parity to token reports with bank interest rates for Foreigners • Enterprise Departmental Liquidity / Treasury Management and Procurement Control • Effective audited visibility on all flows and balances at all levels, locked per budgets • Employee Remittance Schemes • Pay staff with FIAT tokens for fractional cost with expense claims, advances, etc support DERISK MULTI-BANK, -CURRENCY TRADES WITH CSDT INTERCHANGE CSDT INTERCHANGE The latest development in Decentralised Finance promises to enable faster, simpler Banking: • Multi-Bank Issuing & Net-Interbank Settlement TOKENISED DEPOSITS • Retain individual bank autonomy with CSDT interchange model for local trade • Multi-Currency & Multi-Region Trade • Maintain price point with CSDT synthetic Cross Border Trade, Diaspora, Forex, etc • Peer to Peer Loan / Collateral Liquidity Products • Create new decentralized loan products or augment liquidity to existing schemes • Collateralise Tokenised Assets on Chain for FIAT Liquidity • Ownership, Equity, Deeds, etc can be immutably secured to fast track collections, etc COST EFFECTIVE TOKEN LISTING & SALE OF NEW INSTRUMENTS ISSUANCE & AUCTION Cost effective Token Creation, Listing and Sale Platform for Capital Market Applications: • Debentures TOKENISED DEPOSITS • Platform Issuance to Book Building, Auction, Interest Payments and Debt Management • Equity / Shares • Issuance and Holder Rights and Governance to expand on Debentures Architecture • Asset Backed Stable Coins (Gold, Platinum, Diamonds, etc) • Issue and Trade of Instruments backed by Custodial Assets • Index Tracked Stable Coins (FX, S&P500, DOW, ALLSHARE, etc) • Issue and Trade Index Tracking Investment Baskets or Synthetic Indexes • Green Products (Energy, Carbon Credits, etc) • Easily and cost effectively Issue new Instruments for Emerging Market applications CREATE NEW MARKETS FOR NEW APPLICATIONS WITH P2P LIQUIDITY PEER TO PEER TRADING Decentralised Token Exchange & DeFi Modules for a wide range of Peer To Peer Markets: • Spot, TAS & Forward Markets TOKENISED DEPOSITS • Secondary Trade Markets for Debts, Equity, Commodity, Forex and other Tokens • Synthetic Derivative (Future) Markets • Trade Future Values with Capital Efficiencies, without CounterParty risk • Decentralised OTC Lender/Loan Markets • Develop new market products or augment existing liquidity solutions MANAGING DEBENTURES ISSUING A single platform to for issuing, book building, auction, payments and rescheduling BENEFITS TO A TOKENISED DEPOSIT ECOSYSTEM SUPPORTING THE ENTIRE DEBT VALUE CHAIN • Debt tokenisation through deterministic contracts with mutable logic Debt tokens are recorded on the publicly verified FIAT chain, ensuring transparency to all stakeholders • Debt modelling through capital and interest tokens: Issuers mint capital debt tokens as well as interest payment debt tokens at inception, endowing tokens with debt holder voting rights, and time-lock to prevent redemption before pay due date. • IOI / book building process Through open Peer to Peer trading, issuer can gauge investor interest directly and adjust their guidance interest rate and terms according to real-time demand. • Auction / sale processes Once the book is built, the issuer is able to either take up orders from the book based on price and volume, or by specific bidders (in case a specific entity is preferred over another). Alternatively blind, dutch and other public auction models are also supported. • Extension to support Equity Token issuance Equity issuance and auction follows a very similar protocol and is available on the same marketplace, or under a separate brand if required. P2P TOKEN MARKETS Semi-autonomous tokenised marketplaces driving value for a new class of customer THE PEER TO PEER MARKET LANDSCAPE Futures Treasury Debt Repurchase markets note / bill / issuance markets (Forex, Equity, bond markets Commodity) Size of the financial opportunity Commodity Forex Equity markets markets markets “Crop Green Energy Futures” Markets markets Carbon Credit Markets Strategic value of opportunity THE CONCEPT A P2P OTC Tokenised Futures Market Futures Trading Peer to Peer (OTC) Capital Efficiency Stable Coin Contract against peers Leverage capital up to Safe and secure deposit Offset a range of future on an open market with 50x on select markets / withdrawals through risks over 30, 90 or 180 supply / demand without the risk of Bank’s AML compliant days with a variety of pressure creating counterparty default Stable Coin / closed loop instruments transparent pricing through capped profit / value system product. loss contracts. THE MANDATE THE “ZA F(X)” MARKET CREATES NEW VALUE A safer way for a broader spectrum of actors to offset risk across the following markets: 1. Forex 2. Alternatives (Carbon Credits / Green Energy / Crop Futures, etc) 3. Commodities 4. Equities It is anticipated that Forex Futures will serve as a first test market. THE CONCEPT A P2P OTC Tokenised Futures Market VALUES / CAPABILITIES Futures Trading Peer to Peer (OTC) Capital Efficiency Stable Coin DIFFERENTIATORS • Predictable client exposure • No exportation of value • Deterministic outcomes • Creation of new markets • Guaranteed trade execution • Full KYC / AML compliance • Guaranteed settlement value • Fraud / tamper resistant • Trade & Order Transparency • 3PIM / Broker Trade Support • Real time settlement • Lucrative trading fees • Real time reporting • Independent control of trades THE CONCEPT Disintermediated Peer to Peer OTC Token Market Benefits At A Glance: Peer 2 Peer Token Futures Ecosystem • No Exportation of Value Platform Operator Each Partner Provides: Market Partners • No Capital Flight New New New Forex • No Counter-Party Risk market #1 market #2 market #3 Futures • Futures Index • Market Liquidity • No Central Counter Party • Credibility • No Insurance Fund • Content/Insights New New New New • 100% Synthetic Trades market #5 market #6 market #7 market #8 • 100% Collateralised • 100% Transparent Peer 2 Peer Deterministic BANK ZAR Oversight Token Settlement • Capped Risk / Reward Stable Token Reporting Contracts Engine • Predictable Trade Result • Real-time Settlement Short & Long Fund Deposit KYC / AML Contract Trade / Withdrawal Compliance Integrity Reports 38 P2P FUTURES MARKET Trading OTC futures with stable tokens
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