Security token: Detailed tech design pt 2
Consider someone looking to raise capital for their venture, investment fund, property development project or property.
He will first have to create an investment offer document which describes the terms of his offer. For this he can work with a 3rd party compliance partner or use the Konkrete issuance service.
This offer document will specific things such as what is the offer for, how much is being raised, details of risks and returns and important parameters such as
- Number of shares/units being offered
- Country of registration
- Offer open to investors based on
- Country
- Investor type/ Retail/ Wholesale, accredited, institutional etc
- Any restrictions on secondary market trading based on controls by issuer on who the securities gets transferred to and how (limitations on number of transactions and total traded volume etc)
Once the securities offer is established the fundraiser (issuer) will approach the Konkrete security tokenization service to create security tokens for his or her offer.
The security tokens would be based on the ERC 981 standard and would have the above attributes
- Number of shares/units being offered
- Country of registration
- Offer open to investors based on
- Country
- Investor type/ Retail/ Wholesale, accredited, institutional etc
- Any restrictions on secondary market trading based on controls by issuer on who the securities gets transferred to and how (limitations on number of transactions and total traded volume etc)
These security tokens would now be listed on the Konkrete listing platform alongside several other security tokens. Note that we may also permit the issuers to run their own semi independent platforms whitelabeled and custom branded to their own needs. This would allow us to pick and choose the specific offers we want to permit on the main Konkrete platform while still allowing the issuers to run the offers they want under their own brand in the event we do not want these offers on the main platform.
On the investor side, anyone looking to subscribe to these offers needs to first complete their KYC and then if they are a wholesale or accredited investor they have to get that verification done associated with their account.
The investor will approach a verifier duly registered on the platform as such (a Justice of peace for instance). He would present his ids and once the ids have been verified, the verifier would sign the wallet address of the investor as KYC complete using his public key.
If the investor is a wholesale, accredited investor etc he would approach an accountant or suitable authority registered in the platform who would provide the required certifications on his wallet in a similar manner.
Once the wallet is setup, the investor would deposit some stable AUD coins in his wallet which he can then use to invest in various offers. He may buy them using crypto or regular fiat currency. We are considering doing our own stable AUD coin.
At this point the investor may choose to subscribe for any offer on the platform.
Before the security token is deposited into the investors wallet, the security token would automatically check if the wallet has met the KYC requirements and the wallet satisfies the restrictions that particular security token has around which countries the investors can come from and whether or not the investor satisfies any requirements around wholesale, accredited etc.
The stable coins will now be deposited into the security smart contract which was created as part of the tokenization of the security at the onset.
This smart contract would then distribute the stable coins to the issuer of the offer as per the terms of the investment offer (milestones, timing etc). The smart contract would also publish regular updates to the investors when such funds were distributed providing continuous disclosure.
In the event that the investor wants to sell the tokens to another investor, the similar checks around KYC and investor restrictions would be followed for the buyer.