Last updated 5 months ago
New regulation will define most RWA tokens on-chain as securities, creating opportunities for broker dealers to issue securities on-chain, but there’s no turn-key compliance solution on Cardano.
Create an open source compliance layer enabling broker dealers to customize and issue new securities as on-chain tokens while adhering to U.S. regulatory compliance.
This is the total amount allocated to Compliance Layer to Onboard $100 trillion Securities Market.
Please provide your proposal title
Compliance Layer to Onboard $100 trillion Securities Market
Enter the amount of funding you are requesting in ADA
100000
Please specify how many months you expect your project to last
10
Please indicate if your proposal has been auto-translated
No
Original Language
en
What is the problem you want to solve?
New regulation will define most RWA tokens on-chain as securities, creating opportunities for broker dealers to issue securities on-chain, but there’s no turn-key compliance solution on Cardano.
Does your project have any dependencies on other organizations, technical or otherwise?
No
Describe any dependencies or write 'No dependencies'
No dependencies
Will your project's outputs be fully open source?
Yes
License and Additional Information
We will offer the solution via a copy left open source license.
Please choose the most relevant theme and tag related to the outcomes of your proposal.
DeFi
Describe what makes your idea innovative compared to what has been previously funded (whether by you or others).
There is a massive opportunity to attract regulated institutions to tokenize assets on Cardano.
There will soon be regulation in the U.S. (the largest security issuance market), which will provide clear rules and guidance on how assets may be securitized as tokens on-chain.
L4VA has already developed open source smart contract vaults to store tokenized assets on chain, with built in governance and distrubtions.
By adding an open source compliance layer, Cardano can attract the $100 trillion+ broker dealer market as users and build massive adoption, transactions, and TVL.
Describe what your prototype or MVP will demonstrate, and where it can be accessed.
Our prototype will provide an open source tooling layer, which will allow vault creators to (1) configure smart contracts that include certain settings/restrictions, based on security type to comply with law, (2) attach disclosure documentation to the smart contracts, (3) customize and receive fees, and (4) complete KYC via integrations with existing platforms for whitelisting of investors.
Describe realistic measures of success, ideally with on-chain metrics.
Our goal is to provide a "compliance as a service" framework for issuing new asset types as securities on Cardano.
Upon new laws being passed in the U.S. which regulate this market, we aim to onboard broker dealers or other issuers who adopt these tools to issue securities using the smart contract vaults and client platform in a compliant way, driving TVL, broker dealers, and new users to Cardano as large numbers of assets are securitized as tokens on chain.
If we can accomplish $10 million of TVL over 12 months after launch, we would see that as a major success of the MVP.
Please describe your proposed solution and how it addresses the problem
We plan to develop compliance-wrapped smart contract templates for L4VA vaults, which will allow broker dealers or other issuers to tokenize securities in L4VA vaults and issue new tokens representing those assets in a compliant manner with the following settings / features:
Please define the positive impact your project will have on the wider Cardano community
This proposal has the potential to bring $100's of billions of dollars if not $trillions of dollars to Cardano over time across RWAs, company stock, bonds, treasuries, real estate, insurance, and many others.
This compliance tooling could be adapted and adopted by many other platforms who are interested in either acting as a securities issuer, or providing services to broker dealers to issue securities on Cardano.
Without this sort of "compliance as a service" it will lead to large centralized compliance exchanges (CEXs, etc.) to dominate the market and gatekeep Cardano and other democratized blockchains from attracting broker dealers to their platforms.
Broker dealers will be the gatekeepers of a massive portion of securitized assets on chain and we need to have an easy onboarding path and compliance framework that they can follow if they're to choose Cardano as a blockchain of choice!
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?
Our principal Rob Eberenz has deep experience in financial markets, from over 10 years of investment banking experience, as well as 5+ years of enterprise software startup management. We're uniquely suited to complete the research, analysis, scoping, and implementation of a lean compliance layer that can benefit Cardano as a whole and the network to develop relationships with real asset issuers and broker dealers who we can offer this solution to as a way of onboarding these players to Cardano security token issuance.
We have already delivered Asset Fractionalization Vaults (Fund 12, testnet by time of voting) as a team, which are configurable to allow creators to create new vaults of onchain assets which can then accept ADA from acquirers and mint new governance tokens representing the assets in the vaults, which is the foundation to then offer a compliant way for broker dealers to create securitie vaults with built-in-compliance.
This puts us in a unique position to build this tooling and offer it to broker dealer clients or other issuers, who want to be issuing tokens as securities under different regulations types (Reg D, Reg A+, etc.).
Milestone Title
Requirements
Milestone Outputs
Completion of (i) written requirements for the user interface features, and user experience flows, (ii) written requirements of smart contract functionality upgrades, and (iii) a diagram of how smart contracts will operate together with the API and UI to deliver the intended user experience.
Acceptance Criteria
Requirements must clearly document the core user flows and functionality to show:
Evidence of Completion
Posting of the requirements to a publicly accessible document link that is available to view by anyone.
Delivery Month
2
Cost
30000
Progress
30 %
Milestone Title
Completion of front-end prototype web interface
Milestone Outputs
To show the updates of the user interface functionality and show a visual demonstration of how the intended user flow and features will enable vault creators to cusotmize compliance based on the types of securities they're offering.
Acceptance Criteria
Clickable web based user interface, which can successfully demonstrate configuration actions in the UI, navigate through at least 3 use case flows on the page, and be ready for implementation of API and smart contracts for testnet.
Evidence of Completion
Commit front end code to git-hub, share the public code link in the milestone review page, and record a demonstration video of the user flows in the clickable UI.
Delivery Month
3
Cost
30000
Progress
50 %
Milestone Title
API & Smart Contract Integration on Preprod
Milestone Outputs
Demonstrate the successful implementation of the smart contract upgrades and the L4VA protocol API, to show how vaults can be configured for different securities types, with evidence of smart contract vaults working and associated vault documentation on-chain.
Acceptance Criteria
Vaults must be configurable by securities types, where the vault creators (issuers) can choose the type of security then be directed to confirm dynamic settings required for that type of security, add documentation to be added to the vault NFT on-chain, then demonstrate users interacting with the vault on preprod, completing KYC flows, and testing the settings/requirements of the securities rules.
Evidence of Completion
Demonstrate through a screen recorded demonstration the completion of the setup of a vault with the specific settings for a securities compliant vault creator issuing vault tokens; chosing the settings, contributing assets, adding documentation, users completing KYC, issuing a compliance token, and minting the vault token. The onchain vault asset and transactions should be shared in the milestone evidence submission.
Delivery Month
6
Cost
25000
Progress
80 %
Milestone Title
Main-net Launch
Milestone Outputs
Launch the upgraded protocol to mainnet and demonstrate the ability to create new vaults with compliance settings, then complete the full flow of creating a securities compliant vault for a Reg D listing, which can be issued without a broker dealer.
Acceptance Criteria
The protocol must allow the creator to choose a compliant vault type, then contribute assets, add documentation on chain, complete KYC, accept ADA from compliant investors, and issue the vault token to the acquirers.
Evidence of Completion
Demonstrate the flow in acceptance criteria above by recording the steps listed above in the user flow, then sharing the web links to the relevant transactions via a public cardano blockchain scanner website.
Delivery Month
8
Cost
15000
Progress
100 %
Please provide a cost breakdown of the proposed work and resources
30,000 ADA = Smart Contract Upgrades: Smart contracts protocol development to allow the expanded functionality.
20,000 ADA = API development and integrations to trading platforms and data feeds, to enable the settings of various securities types being configured in the smart contracts.
5,000 ADA = UX/UI Design: We subsidized the cost of UX/UI design in our Catalyst proposal for this scope of work, by assigning it to a core team member who will be responsible for producing full designs for the web app.
10,000 ADA = Front-end Development: Front-end web development for dynamic governance proposals.
10,000 ADA = Tech Support & Dev Ops: Our full-stack engineering team will initially be charged with providing technical support during the Test-net and Public Launch phases of the project, with the expectation that we may need to add part-time support engineers before protocol income becomes enough to support.
10,000 ADA = Marketing: We will allocate this budget to paid digital marketing on common channels across Cardano and sponsorships to raise awareness of our Test-net and Main-net upgrades.
10,000 = Legal: We are budgeting to pay for legal advice on the legality of the protocol upgrades and how to launch it in a compliant manner. We plan to finance additional legal fees through Other sources of Funds.
5,000 = Project Management: Technical project management will be managed as part of the scope for each deliverable above
Other Sources of Funds:
NFT Mint: We have successfully raised 50,000 ADA via our first NFT mint, and intend to raise an additional ADA via additional mints.
Founder funding: The core team has funded the project to date, and are capable of supporting the project personally if needed.
Token Sale: We plan to complete a token sale event to raise additional funds for the viability of the platform and project.
How does the cost of the project represent value for the Cardano ecosystem?
We have previously worked with a development agency for smart contract and back-end protocol development. With this strong smart contract foundation we will be utilizing our internal team, outside advisors, and smart contract development contractors to complete smart contract upgrades in the most cost-efficient manner while maintaining the highest standards of quality and security.
We are utilizing our highly skilled team of Ukraine based contractors for the majority of the work, who are very cost effective and good value for money in terms of output and quality of code. This team have experience implementing enterprise0grade software applications with SOC 2 compliance and are highly professional.
We have also subsidized team labor or covered costs associated with (1) Executive Project Management, (2) Marketing Management, (3) Community Management, (4) Legal Fees, and (5) Tech Support, DevOps, etc.
Terms and Conditions:
Yes
Rob Eberenz (principal):
Nick Goehner (Advisor):
Aric Fedida (Advisor)
Vladyslav Koshevoi (Engineering Lead):
Anton Hrabarchuk (Full Stack Engineer):
Ihor Kordiukov (Project Manager)
Adrian Fanatiu (Cardano Technology Advisor) - DeadPxlz Founder
Bassthay (Community Management and Support)