ReguLend

Our crypto lending platform aims to bridge the gap for individuals with Crypto assets who might not be able to secure traditional loans due to poor credit scores. By leveraging the value of their crypto assets, we provide a new pathway for these individuals to access necessary funds as stablecoins / CBDC tokens and overcoming the barriers imposed by traditional lending institutions.

Team

• Karl Timmins
• Faran Khan
• Aws Al-Adhami
• Harsha
• Mustafa Kamal
• Luthiano Trarbach

Description

Our DeFi platform is designed at its core to be simplistic and user friendly with the capability to allow borrowers and lenders to leverage their assets to create a decentralized platform releasing equity from assets held within the crypto eco-system with regulatory compliance such as KYC, AML and CFT. Currently individuals have a lengthy process to exit the market and in many instances do not wish to sell their positions for a loss; or for a perceived loss. Our DeFi platfrom will allow them to lock their crypto asset at present value for similar value in stablecoins / CBDC tokens and make regular payments to receive their assets back at the initial loan price plus interest. This creates a scenario whereby should the locked asset increase in value to a greater amount within the duration of the loan agreement, the borrower can realize the original value and take advantage of the increase in asset price once the loan + interest has been paid in full.

Business Problem

We have seen crypto owners sitting on their crypto assets and waiting for the prices to go up and down without utilizing the true value of their assets. We open the possibility to use those crypto assets in exchange for stablecoins / CBDC (Central Bank Digital Currency) tokens, which then can be used to pay for products/services. By paying back the stablecoins / CBDC on agreeable terms, the owner gets to keep the full crypto asset.

Regulatory Compliance

• KYC: The lender and the borrower should be correctly identified and verified before deposting and withdrawing stablecoins / CBDC tokens / crypto-assets.
• AML: Anti-Money Laundering (AML) legislation ensures that the sources of money or funds are legitimate.
• CFT: Combating Financing of Terrorism (CFT) legislation makes sure that the recipients of the money or funds are not involved in terrorism. The system should verify that the circulation of stablecoins / CBDC tokens is made in the legitimate way.

Risk Mitigation

• Lending that uses volatile assets like cryptocurrencies or certain types of collateral inherently carries several risks. Like Collateral Depreciation Risk, Liquidity Risk and others. In order to mitigate the risks we have strategies and models to estimate potential asset depreciation and incorporate that risk into the loan interest rate to mitigate the risk of defaults due to collateral depreciation. A few such strategies are, Over-Collateralization, Automated Liquidation Mechanisms, Frequent Valuations and Margin Calls.
• Our Model would be Combining Historical Volatility with Moving Average: Combining both historical volatility and moving average methods provides a balanced view that accounts for short-term fluctuations and long-term trends.

Flow of Artefact

1. Lender deposits stablecoins / CBDC tokens into our platform and an NFT is generated as receipt.
2. Borrower deposits his/her crypto asset as collateral to gain stablecoins / CBDC tokens and an NFT is generated as receipt.
3. Pool of tokens and assets is created.
4. Regulatory compliance such as KYC, AML and CFT is being done using smart contracts and multi-chain blockchain.
5. Borrower is given the required loan in the form of stablecoins / CBDC tokens on agreed terms.
6. Lender gets his/her deposited tokens back with some interest after agreed terms.

Features in Artefact

MetaMask wallet is used to confirm transactions and sign messgages.

1. We have utilized EIP-20 as our fungible token standard. Our Stablecoins / CBDC tokens exist as ERC20 tokens.
2. We have utilized EIP-721 as our non-fungible token standard.
3. We have utilized EIP-7377 as our account abstraction standard.
4. We have utilized EIP-1271 as our signature validation standard.

Tech Stack

The artefact is a decentralized app (dApp) built using:

• Hardhat (Ethereum development environment)
• OpenZeppelin (smart contracts)
• Ethers.js (web3 library)
• React.js (frontend library)

User Stories

1. Middle Income User

Pain Points

Difficulty meeting loan terms. Struggling with regular savings. However, posses a crypto asset with future value.

Scenario

User has a crypto asset but requires a loan to make a payment for a holiday in the form of stablecoin / CBDC token. User’s asset has the ability to rise in value in the short-to-medium term but the existing method to trade that asset lacks regulatory compliance and includes high fees to withdraw funds. Making use of DeFi and CBDC service, the user can trade his/her asset for a stablecoin / CBDC token at an agreed amount, terms, rate of interest with blockchain-based regulated KYC. During the term of the loan, the value of the asset held as collateral increases to double. The user repays the loan in full including the interest and the asset is released.

2. Low Income User

Pain Points

Has arrears on his/her mortgage repayments. Cannot maintain the current level of debt. But posses a crypto asset with future value.

Scenario

Borrower has a crypto asset to a value of €1100 and uses it as collateral to get a loan of €1000 + 10% interest. The user agrees the term of 11 months @ €100 per month. The borrower makes five payments of €100. During this period, the value of the collateralized asset drops to €600 and the borrower decides not to continue with the repayment of the loan. The €600 asset and the €500 paid in installments are reverted back to the lender. The circulation of the money will be in the form of stablecoins / CBDC tokens.

Scope

The scope of this is in France, Banque de France being the first central bank to launch an ambitious experimental programme on wholesale central bank digital currency (CBDC) for large-value payments in 2020 (Banque de France official website). The platform is designed so that it is not a digital bank but rather a payment intermediary where we act as the data controller and comply with consumer protection code (CPC). The lenders who will invest their stablecoins / CBDC tokens in the lending pool for a return which will be KYC verified including necessary details like wallet addresses etc. The borrowers will be verified by proofs of identity and wallet addresses alongside the Crypto asset they want to use as collateral. The present value of the Crypto asset is locked at the time of borrowing where the terms of payback will be set through smart contracts.

Central Bank of France, Banque de France (Whitepaper): https://www.banque-france.fr/en/financial-stability/financial-stability-mandate/supporting-digital-transformation-financial-sector/wholesale-mnbc

Stakeholders

• Central Bank
• Crypto asset holders
• Lenders
• Other DeFi platform providers

Business Outcomes

• Secure interaction between borrowers and lenders
• Transparency and Regulatory compliance
• Integration with other DeFi platforms and central banks

Architecture Diagram

Use Case Diagram