Introducing CHΛTΞΛU

A novel DeFi protocol and legal framework to issue, trade and settle tokenized Real World Assets compliant in Bermuda and the British Virgin Islands.

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Summary

Linking DeFi to Real World Assets has been a fundamental challenge in the cryptocurrency industry since its inception. Many past and current attempts are encumbered by challenges around origination, custody, management, and legal compliance.

CHΛTEΛU is a composable DeFi protocol that introduces the Generalized Equity Linked Token (GELT), a new model for tokenizing off chain assets. This token model standardizes the issuance, compliance, trading and settlement of off chain assets with the Bermuda and British Virgin Islands regimes in mind, but can be expanded to include other jurisdictions in the future.

CHΛTEΛU abstracts complexity away from end users, presenting a simple UX to buy, and trade their preferred assets similar to NFT trading, with composable interoperability with other DeFi protocols.

CHΛTEΛU’s promise lies in its ability to streamline RWA issuances, aggregate RWA offerings and deliver value to investors and issuers around the world in a fractional, transparent and accessible manner.

In short, CHΛTEΛU is building a crypto native global financial system.

Overview

Connecting on-chain primitives to Real World Assets (RWA) has been the Holy Grail of DeFi since its inception. Since the early days of Bitcoin, experiments with SWARM and Colored Coins included attempts to capture equity exposure on chain in the form of coins. Later ICOs and most recent DAOs are innovations in the same vein, yet no crypto product has truly brought mass equity exposure on-chain in a scalable manner.

“Real World Yield’ protocols such as Maple.finance, TruFi and Goldfinch are “CeDeFi” protocols that bring exposure to debt instruments through the centralized intermediary of the company themselves. This model has successfully originated close to $5 Billion in debt since inception, proving there is immense market demand for Real World related exposure on chain. Yet making the step from Debt to Equity instruments present complex issues and tradeoffs.

Compliance

Let’s first address the elephant in the room: US Security Regulations.

Crypto products with direct U.S. offerings are regulated by SEC issuance rules regardless of where and to whom it is offered.

From the many failed attempts at U.S. based Security Token startups, one can safely conclude the American regime isn’t conducive to the kind of innovation necessary for mainstream adoption.

However, Non U.S. product, including derivatives, may be issued by offshore entities to offshore investors with local particular jurisdiction-only compliance, without obedience to U.S. based compliance standards.

  • As Laureate, a Bermuda Virtual Asset Service Provider(VASP) for institutional focused offerings, which might include U.S. investors.

CHΛTEΛU is focused on utilizing light touch, common sense, robust compliance frameworks to maximize product breadth and investor reach. Our current compliance frameworks are based on issuer-investor locations, as well as product specificity.

Therefore, CHΛTEΛU is strictly unavailable for U.S. Persons, inclusive of qualified Investors and Funds. For a U.S. compliant product, visit our sister company at Laureate. (www.laureate.io)

At launch, CHΛTEΛU products will be issued in, and comply with 2 different compliance regimes:

  1. The British Virgin Islands for retail Non-US offerings.

Introducing: GELT

CHΛTEΛU’s RWA token model built upon our compliance frameworks is called a GELT: Generalized Equity Linked Token.

A GELT is an on-chain representation of private equity instruments with details specific to each issuance.

GELTs are derivatives because they are generally tokenized forward swaps against contracts for equity instruments executed by CHΛTEΛU. They are generalized because they all generally provide exposure to equity upside and settle in stablecoin.

Tech

GELTs are composable ERC-1155 semi fungible token families with one series issued for every issuing entity, which may be a company, organization, non-profit or DAO.

Each ERC-1155 includes an NFT representing the KYC on chain identity of the issuer, and a series of underlying ERC-3643 or ERC-20 or ERC-4626 tokens, depending on product type.

For example, a CHΛTEΛU GELT may include a series of ERC-3643 representing common stock, and an ERC-4626 USDT Debt pool.

The GELT Token Lifecycle

Unlike crypto native assets, RWA related tokens naturally have an expiry whether it be by design (Instruments with expiry or conversion dates, physical delivery, etc), or necessity (Issuer goes out of business, gets acquired, etc)

The overview of the GELT lifecycle is as follows:

Issuance

1. Due Diligence

After identifying a suitable candidate issuer, CHΛTEΛU proceeds with intensive due diligence on the background and identity of the issuer. Background checks include KYC/AML and OFAC checks, as well as investigations on the legitimacy, transferability and jurisdictional compliance requirements of the underlying assets

Diligence on the rights to title Does the issuer own the right to underlying? Can the Asset be transferred to CHΛTEΛU?

Diligence on transferability

Can this instrument be transferred? Under what bylaws? Are there jurisdictional concerns?

2. Warehousing

Contracts are issued between issuer and CHΛTEΛU where the underlying instrument, or forward swap contracts against the underlying are legally brought under CHΛTEΛU’s ownership.

3. Issuing GELT

GELT is minted and issued on www.chateau.capital, and made available for on-chain order book trading.

Settlement

CHΛTEΛU will cash settle all GELT by default. Different instruments have different expiry dates and conditions.

  1. Once expiry conditions are met, underlying GELT tokens halt trading.

  2. Contracts of the underlying instrument are executed by CHΛTEΛU and the resulting US Dollar denominated value is repatriated to corresponding GELT owners in stablecoin. (Physical delivery may be available in the future.)

Key Risks and Vulnerability

There are certain key risks with CHΛTEΛU’s GELT model.

Counterparty Risk

GELT needs to be backed by solid instruments to ensure proper backing and exposure is achieved. This risk can be averted with proper due diligence in all transactions, and proper risk pooling to ensure customers are always made whole when anomalies occur.

Shares that cannot be transferred, jurisdictions that do not allow for international investors, etc will be disastrous for GELTs. This risk can be averted with proper due diligence.

The Big Picture

CHΛTEΛU is building a crypto native Global Finance System. The GELT model unlocks access to Trillions of dollars in Real World Assets on chain.

Compared to boomer legacy finance, CHΛTEΛU has the following advantages:

  1. Fractional investment to institutional products

  2. 24/7 Global access with low barriers to entry

  3. Composable RWA: DeFi lending markets, derivatives, perps and fundraising platforms can be built around GELT.

  4. Light Touch Legal frameworks that can scale into more product offerings: Stablecoins, Commodities, Derivatives and more.

Token Model

There are no plans for a native token currently.

However, if such a token were to somehow materialize out of thin air some particular time in the unforeseeable future, it would most likely be airdropped to the most active users in proportion on their trading volume.

It will be used in governance, to capture protocol value for staking investors. To facilitate liquidity and insurance amongst different GELT offerings. To incentivize staking LPs for liquidity provisioning, as a form of loyalty program and more.

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