Bringing bank accounts (IBAN) On-Chain on Cardano through a L2 network

[GENERAL] Name and surname of main applicant

[GENERAL] Are you delivering this project as an individual or as an entity (whether formally incorporated or not)

[GENERAL] Please specify how many months you expect your project to last (from 2-12 months)

[GENERAL] Please indicate if your proposal has been auto-translated into English from another language

[GENERAL] Summarize your solution to the problem (200-character limit including spaces)

Our proposed solution leverages the MiCAR regulations to enable the creation of on-chain IBAN accounts on a L2 on top of Cardano, provided the company holds the necessary IBAN issuing license.

[GENERAL] Does your project have any dependencies on other organizations, technical or otherwise?

[GENERAL] If YES, please describe what the dependency is and why you believe it is essential for your project’s delivery. If NO, please write “No dependencies.”

No dependencies.

[GENERAL] Will your project’s output/s be fully open source?

[GENERAL] Please provide here more information on the open source status of your project outputs

The project will be open source under MIT License. This will allow anyone to do whatever they wish with the original code, as long as the original copyright and license notice is included either in the distributed source code or software.

[METADATA] SDG rating

SDG Goals

9 - Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation

17 - Strengthen the means of implementation and revitalize the Global Partnership for Sustainable Development

SDG Subgoals

17.19 - By 2030, build on existing initiatives to develop measurements of progress on sustainable development that complement gross domestic product, and support statistical capacity-building in developing countries

17.3 - Mobilize additional financial resources for developing countries from multiple sources

9.1 - Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being, with a focus on affordable and equitable access for all

9.3 - Increase the access of small-scale industrial and other enterprises, in particular in developing countries, to financial services, including affordable credit, and their integration into value chains and markets

9.b - Support domestic technology development, research and innovation in developing countries, including by ensuring a conducive policy environment for, inter alia, industrial diversification and value addition to commodities

Key Performance Indicator (KPI)

9.1.1 - Proportion of the rural population who live within 2 km of an all-season road

9.1.2 - Passenger and freight volumes, by mode of transport

9.3.1 - Proportion of small-scale industries in total industry value added

9.3.2 - Proportion of small-scale industries with a loan or line of credit

9.b.1 - Proportion of medium and high-tech industry value added in total value added

17.3.1 - Foreign direct investment, official development assistance and South-South cooperation as a proportion of gross national income

17.3.2 - Volume of remittances (in United States dollars) as a proportion of total GDP

17.19.1 - Dollar value of all resources made available to strengthen statistical capacity in developing countries

17.19.2 - Proportion of countries that (a) have conducted at least one population and housing census in the last 10 years; and (b) have achieved 100 per cent birth registration and 80 per cent death registration

[SOLUTION] Please describe your proposed solution

Executive Summary:

This proposal outlines an ideation framework for integrating International Bank Account Numbers (IBAN) with a Layer 2 solution on top of the Cardano blockchain, facilitating the seamless conversion of fiat money into 1:1 backed blockchain tokens. This system enables users to deposit fiat currencies into their IBAN accounts on this L2 platform and convert these into equivalent tokens on the Cardano network, streamlining the bridge between traditional banking and the decentralized finance (DeFi) ecosystem.

Through this proposal, we aim to solidify the technical architecture through technical research and legal discussion and propose a complete detailed architecture to deploy this with a low-fidelity prototype.

Objective:

To develop a system where each Cardano address is associated with a unique IBAN account on a Layer 2 solution, enabling users to:

• Deposit fiat currencies directly onto the Cardano via a L2 network.
• Convert these deposits into equivalent E-Money Tokens (e.g., e-EUR, e-GBP) on a 1:1 basis.
• Enable swift, secure, and compliant transactions within the Cardano ecosystem using these tokens.

Key Features:

• Real-Time Minting: Upon depositing fiat into the IBAN on the L2 solution, an equivalent amount of E-Money Tokens is minted on the blockchain.
• 1:1 Fiat Backing: Each token is backed 1:1 by the deposited fiat, ensuring a stable and seamless conversion.
• Regulatory Compliance: The system is designed to adhere to the Markets in Crypto Assets (MiCA) regulations, providing a secure and compliant environment for users.

Transaction Flow:

• Deposit and Tokenization:
• Users send fiat to their IBAN address on the Layer 2 solution.
• The blockchain mints an equivalent amount of E-Money Tokens (e.g., sending 100 EUR mints 100 e-EUR tokens).

• Internal Transfers:
• E-Money Tokens can be transferred within the network or can be bridged to Cardano.
• Recipients can convert these tokens back to fiat in their own IBAN accounts on the L2 solution.

• External Transfers:
• If E-Money Tokens are sent to an external IBAN address (outside the network), the tokens are burned.
• The corresponding fiat amount is transferred out, maintaining the 1:1 backing integrity.

Regulatory Compliance and MiCA Regulations:

The E Money Network and its operations are structured to comply with the Markets in Crypto Assets (MiCA) regulations, particularly the provisions that apply to E-Money Tokens. Under MiCA:

• Article 3(7) defines E-Money Tokens as a type of crypto-asset that is electronically stored and represents a claim on the issuer. These tokens are issued on receipt of funds for the purpose of making payment transactions and are accepted by persons other than the issuer.
• Article 17 specifies that issuers of E-Money Tokens (Asset-Referenced Tokens) must maintain full backing, meaning each token must be backed by an equivalent amount in fiat currency, ensuring a 1:1 conversion ratio.
• Article 22 ensures that issuers provide holders the right to redeem their tokens at any time at par value for the underlying fiat currency, without additional cost.

Read more about MiCAR here: https://www2.deloitte.com/dl/en/pages/legal/articles/micar-e-geld-token-crypto.html

https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023R1114

This regulatory framework ensures that the operation of E-Money Tokens within the E Money Network is secure, transparent, and compliant with European standards, providing users confidence in their transactions.

Additional Regulatory Point:

• The company deploying this should obtain a VASP license, allowing the provision of crypto services across Europe. This license empowers the establishment of a robust banking ecosystem in a key North American region offering a full range of regulated banking services to users and institutional partners.

Benefits:

• Seamless Conversion: Users can effortlessly convert fiat into tokens and vice versa, simplifying access to the crypto ecosystem via the L2 solution.
• Global Transactions: Enables instant global transactions, reducing costs and delays associated with traditional banking.
• Enhanced Security: Adherence to MiCA regulations ensures that all transactions are secure, transparent, and legally sound.
• Future Expansion: Plans include introducing trading pairs like BTC/e-EUR, giving users more options to utilize their fiat-backed tokens.

Conclusion:

Integrating IBAN accounts with a Layer 2 solution on the Cardano blockchain through the E Money Tokens represents a significant advancement in bridging traditional finance with DeFi. By facilitating direct deposits and 1:1 fiat-to-token conversions, this system enhances transaction security, ensures regulatory compliance, and makes digital finance accessible to a broader audience.

[IMPACT] Please define the positive impact your project will have on the wider Cardano community

This conceptual proposal outlines a framework for integrating International Bank Account Numbers (IBAN) with the Cardano blockchain via the E Money Network Wallet. The primary goal is to streamline the transition from traditional finance to decentralized finance (DeFi) by enabling direct conversions of fiat money into E-Money Tokens on the Cardano network. This integration seeks to enhance financial accessibility, ensure compliance with regulatory standards, and support diverse financial services within the Cardano ecosystem.

Positive Impact on the Cardano Community:

• Simplified DeFi Access: Utilizing familiar IBAN systems for blockchain transactions, this proposal promotes broader adoption of Cardano for financial activities, making it more accessible and user-friendly.
• Financial Inclusion: The direct deposit and conversion to E-Money Tokens enable cheaper, faster global transactions, which can significantly benefit the underbanked population by providing more accessible financial services.
• Regulatory Trust: Adhering to MiCA regulations bolsters the legitimacy of Cardano as a secure and compliant financial platform, fostering trust among users and regulators.
• New Financial Services: This framework enables a variety of financial activities on Cardano, attracting a diverse range of users and investors, and expanding the ecosystem's functionality.

Conceptual Impact Assessment:

• Ecosystem Enhancement: This integration demonstrates Cardano’s utility by bridging it with traditional financial systems, potentially increasing its diversity of applications and market relevance.
• Community Growth: By making the transition into crypto easier for users from traditional finance backgrounds, this proposal helps to expand the Cardano community and foster a more inclusive environment.
• Research Contributions: This initiative serves as a case study for financial innovation on the blockchain, contributing to broader research and development efforts within the crypto and financial sectors.

Sharing the Framework and Insights:

• Documentation: Key concepts and methodologies will be thoroughly documented and disseminated through Cardano’s communication channels and forums to encourage community engagement and discussion.
• Collaborative Development: This approach includes engaging with financial and blockchain experts to refine the framework, with progress shared on collaborative platforms to foster a community-driven development process.
• Outreach: The framework will be presented at various conferences to gather feedback and showcase its potential benefits and applications to a broader audience, enhancing visibility and impact.

This approach is designed to provide a scalable and secure environment for fostering financial innovation within the Cardano ecosystem, aligning with both current regulatory frameworks and future financial needs.

[CAPABILITY & FEASIBILITY] What is your capability to deliver your project with high levels of trust and accountability? How do you intend to validate if your approach is feasible?

Capability to Deliver

Our team is uniquely equipped to deliver this project with high levels of trust and accountability, thanks to a blend of direct experience and technical expertise within the Cardano ecosystem:

• Proven Track Record: Our team has been building products and solutions for Cardano under Lovelace Club brand since past two years that required meticulous planning and robust technical implementation, recognized for their innovation and impact.

• Development Team: Our developers have extensive experience in blockchain development, particularly on the Cardano platform. They have contributed to successful Cardano-based projects and are proficient in cardano dApp development.

• Established Brand Presence: We have built a recognized brand within the Cardano community, the Lovelace Club, where we successfully ran an on-chain randomized lottery platform. This experience highlights our capability to manage and execute blockchain-based projects effectively.

• Expertise and Experience: Our team possesses extensive experience in blockchain development and cryptography, providing us with a profound understanding of the complexities involved. We have successfully developed several products and brands within the Cardano ecosystem, including:
• An on-chain randomized lottery protocol (https://alpha.lottery.lovelaceclub.com/),
• A staking protocol (https://staking.lovelaceclub.com),
• An on-chain communication platform (https://v1.adaconnect.io).

With a collective experience of over 20 years in the blockchain domain, our team is well-equipped with the necessary expertise to develop and deliver this project. This blend of experience and proven success in the Cardano ecosystem ensures that we are prepared to bring this concept to fruition, enhancing the Cardano blockchain's capabilities and community engagement.

Validating Feasibility

To ensure our approach is feasible and to refine our project concept, we will:

• Concept Testing: Initially, we will develop a low-fidelity prototype to test the core concepts and gather early feedback from a small group of ADA holders and startups.

• Community Feedback: We will engage with the wider Cardano community through forums and interactive sessions to validate our approach and adapt based on community input.

• Iterative Development: By adopting an agile methodology, we will iteratively develop and enhance the prototype, ensuring each stage is aligned with user needs and project goals.

Trust and Accountability in Fund Management

We are committed to managing funds with transparency and responsibility. Here are the key steps and processes we will implement:

• Transparent Reporting: We will provide regular, detailed reports on fund allocation and project progress, available to all stakeholders through our website and community forums.

• Stakeholder Engagement: By maintaining open lines of communication and involving stakeholders like founders and developers, we build trust and ensure that the project remains aligned with the community’s interests and expectations.

This comprehensive capability and robust track record position us to deliver this proposal on Cardano, driving forward the blockchain's evolution and expanding its use cases for a global audience.

[PROJECT MILESTONES] What are the key milestones you need to achieve in order to complete your project successfully?

Milestone 1: Full Framework Documention

Outputs:

• Comprehensive conceptual framework analyzing stakeholder roles, regulatory compliance, operational procedures, and strategic considerations.
• Stakeholder roles clearly defined with emphasis on legal compliance and operational efficiency.

Criteria:

• Clear and thorough analysis with logical flow.
• Detailed stakeholder roles and responsibilities.
• Comprehensive operational procedures and regulatory solutions.

Completion Evidence:

• Finalized conceptual framework document approved by the project team and reviewed by external consultants.
• Webinar presentation capturing community feedback.

Milestone 2: Technical Development

Outputs:

• Detailed technical framework analyzing system architecture, data flows, and security measures.
• Description of E Money L2 and integration with IBAN accounts.

Criteria:

• Detailed descriptions of system components and data flows.
• Robust security measures and data protection protocols.
• Interface mechanisms between Cardano blockchain, E Money L2, and traditional banking systems.

Completion Evidence:

• Completed technical framework document peer-reviewed by technical experts.
• Detailed technical presentation showcasing the whole architecture.

Milestone 3: Low-Fidelity Prototype

Outputs:

• Low-fidelity prototype demonstrating IBAN integration with Cardano blockchain.

Criteria:

• Key functionalities demonstrated in prototype, focusing on user experience and transaction processing.
• Positive initial user testing feedback indicating prototype effectiveness.

Completion Evidence:

• Publicly accessible demo of low-fidelity prototype with user guide.
• Recorded demonstration of prototype shared with Cardano community and stakeholders.

Final Milestone: Project Ending Report

Outputs:

• Project ending report summarizing prototype design, development insights, and next steps.

Criteria:

• Comprehensive project ending report with development insights and user feedback.

Completion Evidence:

• Project ending report outlining development insights and summary video

[RESOURCES] Who is in the project team and what are their roles?

Adnan Khan - Tech Lead, Lovelace Club | Product Owner, SyncAI

Adnan is a seasoned web3 professional with 5 years experience in building MVPs, product development, and achieving scalability for early-stage startups. He is graduated with a bachelors in Data Science and Machine Learning. His expertise includes data analytics and web3 development, particularly on-chain analytics. Adnan has served as a research analyst at GravityX Capital and collaborated with top web3 projects like dYdX, Polygon, Frontier, and Bullieverse. He is also a three-time Catalyst winner with a track record of successful proposals.

Uzair Anwar - Growth and Operations Lead, Lovelace Club

Uzair is driving Lovelace Club's product and business growth since it's inception He excels in strategic business development, operational efficiency, and leveraging DeFi and NFT landscapes for growth.

Lovelace Club Our team has over 20 years of collective experience in blockchain development and cryptography. We have successfully developed products within the Cardano ecosystem, including:

• An on-chain randomized lottery protocol (https://alpha.lottery.lovelaceclub.com/)
• A staking protocol (https://staking.lovelaceclub.com)
• An on-chain communication platform (https://v1.adaconnect.io/)

Our expertise ensures we are well-prepared to develop and deliver innovative solutions that enhance the Cardano blockchain's capabilities and community engagement.

[BUDGET & COSTS] Please provide a cost breakdown of the proposed work and resources

Milestone 1:

Total Duration: 45 Days

• Senior Cardano Developer: 15000 ADA
• Smart Contract Developer: 20000 ADA
• Solution Architect: 5000 ADA

Total: 40000 ADA

Milestone 2:

Total Duration: 45 Days

• Senior Cardano Developer: 15000 ADA
• Smart Contract Developer: 20000 ADA
• Solution Architect: 5000 ADA

Total: 40000 ADA

Milestone 3:

Total Duration: 30 Days

• Senior Cardano Developer: 10000 ADA

Total: 10000 ADA

Final Milestone:

Total Duration: 30 Days

• Senior Cardano Developer: 10000 ADA

Total: 10000 ADA

[VALUE FOR MONEY] How does the cost of the project represent value for money for the Cardano ecosystem?

The cost of the project, set at 100,000 ADA, represents significant value for money for the Cardano ecosystem, taking into account the following factors:

Expertise in Cardano: The project necessitates skilled professionals with specialized knowledge of the Cardano blockchain & ecosystem.

These skills are in high demand and command premium rates. The budgeted costs are aligned with industry standards for such expertise.

• Efficient Resource Allocation: The proposed costs for developing and deploying OnChain IBAN accounts on the Cardano blockchain are carefully evaluated to ensure efficient resource allocation. By leveraging existing infrastructure and expertise within the Cardano community, the project minimizes unnecessary expenditures while maximizing the impact of the investment.

• Community-driven Development: The costs are justified by the extensive user feedback and low-fidelity prototype development process. This ensures that resources are allocated towards building a solution that resonates with the needs and preferences of the Cardano community, maximizing the likelihood of adoption and success.

• Feasibility Assessment: The costs are determined based on a thorough feasibility assessment, taking into account factors such as development complexity, regulatory considerations, and market dynamics. This rigorous evaluation process minimizes the risk of budget overruns and ensures that the project remains financially viable throughout its lifecycle.

• Value Proposition: The costs of the proposal are justified by the potential value it brings to the Cardano ecosystem. By democratizing access to venture capital and fostering innovation within the community, the project has the potential to unlock new opportunities for growth and development, ultimately delivering significant long-term value for stakeholders.

In summary, the costs associated with the proposal are justified by the efficient allocation of resources, community-driven development approach, thorough feasibility assessment, and the potential value proposition for the Cardano ecosystem.