RWA Foundations - Jersey edition

The plan for legal entities acting as a conduit for real-world investments for MakerDAO was always to diversify the jurisdiction risk. MIP58 started with Cayman for historical reasons but it was hinted that we should look for other countries. While it was expected for next year, the NebulaCapital vault might accelerate the schedule with a new country: Jersey.

Indeed, their SPV will be based there and, according to their counsel, it would be easier for the regulator to have all parties in the country. Jersey seems to have a similar Foundation structure (names are a bit different tho). They have some great corporate servicers as well (one good match administring $180B of assets)

A (or many) Jersey Foundation could be used for European RWA investments (where Cayman is not seen in a good way). Some starting costs are expected, and a bit of work, but not much. It should reuse the same mechanisms and MIP58.

Not much work has been done on our side yet, but if some community members have some insights and/or comments, feel free.

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Niiice! The Channel Islands! All I can say is that Jersey is prettier than Guernsey :slight_smile:

But no, seriously–good option to investigate, I have mostly heard of offshore Jersey Trust for individuals/families–not much about commercial trust setups. Looking forward to hearing more.

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So long as the trust isn’t in Bayonne, New Jersey, all good.

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After a first pass, the Jersey Foundation is indeed close to the Cayman Foundation yet slightly different.

The supervisor is called the Guardian and the directors are The Council. Jersey wins on the naming which is more Maker-compatible. There is no secretary as the licensed person should be in the Council. As we are using only corporate servicers that are licensed anyway it is not that important.

The guardian seems to be less powerful than a supervisor as it is not clear that he can change the council. He can veto decisions tho. He can allow an act that is not normally allowed in the constitution but that can be disabled by the constitution.

Both structures are super flexible (some might say: meaning you should pay counsel to get something that does what you want).

Some links:

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Seb is there any way you can get your hands on a Case Study of a mortgage liquidation via a Jersey SPV? It would be super interesting to review how the process of such was executed.

Jersey SPVs are common in many international transactions (including, among others, debt capital markets, equity capital markets and private equity transactions) and have been used in a wide variety of structured finance and securitisation transactions including securitisations involving a range of asset classes (such as residential mortgages, consumer loans and credit cards), synthetic securitisations and other structures for the repackaging of financial instruments and off-balance sheet investments.

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Do you have something in mind as your question is quite specific? It is my understanding that the mortgage liquidation would depend more on the jurisdiction of the mortgage than the one of the SPV. For instance, in the SolarX case, the SPV holding the mortgage is in Delaware but needs to register in NY as a foreign entity (as the property is in NY). Otherwise, it is not clear if it could foreclose on a mortgage. This is specific for NY state for instance.

For Nebula Capital (the actual SPV and the investment for such a Jersey Foundation), the assets will be consumer loans. I’m sure there is plenty of Netherland regulation for customer protection. Yet I’m quite sure there is a structuring solution to most problems. We haven’t looked yet at this level of detail. First, we need to see if it makes economic sense for MakerDAO.

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No, I was referring to Asset Liquidations via the Channel Islands–nothing related to the United States.

Something similar to this write-up by Carey Olsen, but more related to MakerDAO RWA collateral types.

I have some experience with this jurisdiction: Good infrastructure in terms of service/legal providers etc - and good working relationships it seems with the regulator. Trust and/or Foundations worth looking into for EU/UK for sure (I am doing that as well - happy to compare notes at some point soon).

My concerns, right now, is time to implement and costs of the structures - and the fact that it probably/potentially have to go through a regulatory approval (possibly light - still trying to work that out!) - and ultimately it is an offshore structure with some constraints in respect of onshore business (depending on where that onshore is of course). Whilst the regulator seem well onboard with ICO and exchanges etc, I fear also being the first case of RWA collateralization in front of the regulator (should that be necessary) - could take some time to get through.

All that being said it is certainly in my top 5 of jurisdictions I am looking at for an application of RWA collateralization in the UK and the EU. And I will continue to look into it - looking forward to share notes in a very near future.

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