WP FINAL 221018 SPREADS F - Flipbook - Page 1
Custody & Safekeeping
Wallet
Custody and safekeeping is in place to ensure that assets which are purchased are maintained by a regulated
firm to ensure to ensure that they are kept safe. This affords the investors a greater level of protection by routing
the monies to where they should be, at the same time building the register and maintaining whose individual
beneficial interests need to be updated. The custody is about holding the assets in a separately maintained
account and the safekeeping ensures this is kept safe for the benefit of the owners. By using our partners we are
able to offer custody and safekeeping of both fiat and crypto assets.
The wallet, where the crypto/token is stored, requires maximum security measures. By working with companies
such as Nivaura, we can ensure we have robust controls and will encourage a hot/cold wallet system to ensure that
risk is diversified:
• Custody: access to an asset and money tracking engine to enable dematerialisation (tokenisation)
of assets (equity) and fiat currency (GBP, USD etc.). This system enables custody, clearing and
settlement of tokens related to money and assets, and ensures compliance with regulations;
• Key Management: signing service based on Nivaura’s Key Custody System, which assigns Keys to
users after full vetting and KYC/AML checks, and allows users to sign deal execution instructions
with a private PIN. This service enables compliant, blockchain-based clearing and settlement of
tokenised money and assets in a compliant manner;
• Money Safekeeping and Tokenisation: collection of client funds in both fiat and crypto currency,
and in case of fiat currencies enable tokenisation for blockchain-based transactions.
• The hot wallet is the gateway of the exchange/platform and allows the customer to instantly
withdraw crypto to their external wallet without the need for an operator’s approval. A hot
wallet needs to have a positive balance for instant withdrawals, which can be set according
to the turnover of the platform.
• A cold storage wallet is where the rest of the crypto and tokens are stored. This wallet is completely
offline and guarantees that nobody can access your crypto/tokens even if the platform is hacked
(therefore, it is advisable to always put aside a certain amount crypto and leave them in your
cold storage wallet). A simple cold storage wallet could be through a USB stick where your
private keys are located. Splitting the tokens into this hot/cold wallet system provides a balance
between security and the convenience of instant withdrawals. Furthermore, Tokenise will
look to partner with a provider who can offer a secure wallet solution. To facilitate this, we
are currently in discussion with a number of potential partners.
Secondary Market
Settlement
In many systems, the principal weaknesses are the reliance on a single point of vulnerability; a central processing
infrastructure, and the tiers of intermediaries for custody settlements and payments (custodians and subcustodians presenting complex risks to custody clients).
Alongside our development and implementation partners, here is a summary of the potential benefits that we
believe can be realised:
• Optimised Settlement: DVP settlement can be faster, with unconditional finality whenever a
counter-party exchanges securities and cash. These are validated and recorded to the distributed
ledger. DLT settlements allow a wider range of dynamic settlement and transactional models to
emerge.
• Cost Efficiency: we can transform and integrate trade documentation, transmission, confirmation
and settlement to streamline back office processes and reduce reconciliation failures.
• Transparency and Confidentiality: distributed ledgers designed for post-trade operations can
protect confidential data of individual investors and individual transactions while. At the same time
they offer more flexible and controlled ways to aggregate and publish data to market participants,
issuers, markets, supervisors and other stakeholders.
• Reconciliation and Audit Trail: Tokenise will immutably record all transactions, actions and
state changes, and therefore can improve trust and efficiency for financial institution interactions.
• Default Resolution: Tokenise will record investor ownership or entitlement immutably and
transparently. Assets in client accounts can be more easily verified.
TK038 V001
The secondary market component of the Tokenise platform is unlike any other crowdfunding platform. All other
crowdfunding platforms have either no secondary market, or a basic market that opens for a very limited time.
Tokenise will build a fully functioning bulletin board that will act for the secondary market (UK only). In due course,
we will be seeking to access an order book, match buy and sell orders, execute transactions and calculate balances.
However, it should be noted that Kession does not currently possess an MTF or OTF licence and Tokenise will not
be providing market making or proprietary trading facilities, it will only act as an arranger for the transactions on
a bilateral basis. It will be there to enable those who wish to sell their security tokens which have been purchased
through our platform to do so, and give those that missed the opportunity to buy, access to those products. This
will all be within the closed loop who have passed the KYC and AML, categorisation and appropriateness tests.
Although the primary market is the acquisition of security tokens (possibly with a utility attached), it is essential
to ensure we have a working secondary market which allows investors to exit their investments on a 24/7 basis.
This is not currently offered by any other security crowdfunding platform. The advent of tokens and blockchain
technology enables this to occur both seamlessly and transparently.
29