This is the MIP6 proposal for the addition of WizKey’s tokenized invoices insured by one of the three main credits insurance company in the world, rated AA- by Fitch and A2 by Moody’s.
WizKey aims to provide its customer enterprises with a new source of financing allowing them to use their invoices as collateral in MCD, therefore it is making its application with the MakerDAO community. Furthermore, we want to bring real-world assets into the MakerDAO ecosystem, strengthening use cases of the protocol. As currently envisioned, our collateral is substantially risks-free for the Maker Foundation and the protocol itself, granting no liabilities as the exposure is to the insurance company and not the issuer itself, namely the companies. WizKey has the obligation of repaying the debt position opened with MakerDAO and, should the invoice not being repaid, the position will be covered by the insurance reimbursement.
We envision this as a great opportunity of growth for the MakerDAO ecosystem, onboarding one of the most important real-world assets. At first, we aim to conduct a pilot operation here in Italy, where the total addressable market is more than $ 2 Trillion. Usually the total value of the issued invoices in a country is a bit more the GDP, so the worldwide addressable market is huge: even a minuscule percentage of that means massive volume for the ecosystem.
Nevertheless, we want to be sure that the interest rates on this kind of collateral is proportionate accordingly to its risk and to the rating of the insurance company. At the time of writing, the interest rates applied to bonds assigned with an AA- rating is largely negative (-0,5% for 1 year maturity), making possible to provide low interest rates. As an example, Credimi, an Italian fintech company providing factoring and invoice discounting through traditional centralized systems, for the same kind of operation we want to put in place, applies an interest between 4-7%. So, if an interest of, let’s said, 2% is applied, it could be very competitive and gains a lot of traction.
After this short intro, please find hereinbelow our answers to the community, hoping that they will be warmly received.
WizKey s.p.a. is an Italian fintech company founded by Marco Pagani (the main contact for this application) and Roberto Ghio, two lawyers with 40+ years’ experience in finance law and structured finance operations, with a deep understanding of the blockchain technology.
Wizkey has deployed Define, a decentralized market for tokenized loans, invoices and asset backed securities. Define is a trustless and end-to-end platform that gathers and certifies all the information related to loans and invoices in order to ensure the buyer with transparency and certainty about the purchased receivables. WizKey Define grants compliance and privacy by design, allowing users align with regulation while preserving high confidentiality in every transaction.
2. Provide a brief high-level overview of the project, with a focus on the applying collateral token.
We provide, first, a brief overview of the collateral we want to use, then, the proposed integration within the MakerDAO ecosystem to use tokenized invoices as collateral for MCD.
Here’s the brief overview of the asset proposed to be used as collateral:
- Collateral: Invoices issued by SMEs guaranteed by a AA- rating insurance company
- Days Outstanding: 90 days invoices
- Collateral Coverage Ratio: 100%
- Interest Rate to Borrowers: 4-7%
- Type of Advance: Factoring
As stated in the introduction, the addressable market is huge, even in minuscule percentages. The Italian market, for example, was worth more than $2 trillion in 2019 meaning that if we manage to route 1% of it on MakerDAO, the volume generated will be billions of dollars per year. Furthermore, by its own nature, the collateral proposed suffers extremely low volatility, further lowered by the insurance applied.
Here is the workflow for the proposed collateral, with an example of $100 invoice and 4% annual interest rate (i.e. 1% on 90 days):
|1||The company (Customer) upload the business profile and financial statement on WizKey;||1|
|2||The insurance company approves the customer and notifies WizKey that it accepts an exposition of up to $100;||3|
|3||Customer and WizKey enter into a token trade contract for: 100 DAI worth $1 each and a price of $101 to be paid in 90 days;||4|
|4||WizKey issues a $101 invoice to 90 days to the Customer (Invoice) and insures it with the insurance company;||4|
|5||WizKey uses the invoice as collateral in a smart contract that issues 100 DAI (Debt Smart Contracts);||4|
|6||The Customer exchanges 100 DAI for $100 on an authorized platform;||4|
|7||The Platform pays $100 to the Customer through a wire transfer;||5-6|
|8||The Customer repays $101 to WizKey in 90 days;||94|
|9||WizKey purchases 101 DAI on the market;||95|
|10||WizKey sends 101 DAI to the Debt Smart Contract to close it.||95|
WizKey was incorporated in August 2018 and developed its first working PoC for the tokenisations of banking loans and invoices, privately released in April 2019, and is being currently commercialised after a one year fine tuning with several banks and servicers. We’re working with several financial institutions in Italy and negotiating two big joint ventures with primary standing players.
Our platform DeFiNe has been awarded with the Seal of Excellence in the context of the European Union “Horizon 2020” programme.
Define is a peer-to-peer and trustless solution in which every user has absolute control and ownership on its own data that is then double checked with public databases.
The three main components of WizKey Define are: Wizkey Client (WKC), WizKey Node (WKN) and WizKey Services (WKS).
WHAT IS A WIZKEY CLIENT (WKC)?
WizKey Client (WKC) is a standalone application on the customer device that joins on-chain and off-chain operations.
WHAT DOES A WIZKEY CLIENT (WKC) DO?
- Uploads documents to WizKey Node and creates data rooms and portfolios.
- Directly requests notarization and tokenization to the blockchain, computing the hash value for each document, then sharing metadata with the corresponding WizKey Node:
- Exchanges data with a WizKey Node to which it is authorized
WHAT DOES THE WIZKEY CLIENT (WKC) PROVIDE?
WKC guarantees no intermediation: the owner of the WKC signs every operation, with no service in the middle.
WKC document hashing ensures that proof-of-existence cannot be compromised, receipts that contain hashes are stored safely, and documents content cannot be reversed, thus protecting privacy.
WHAT IS A WIZKEY NODE (WKN)?
WizKey Node (WKN) is a docker image deployable on a containerized infrastructure both on premise and on a dedicated cloud account.
WHAT DOES A WIZKEY NODE (WKN) DO?
- Stores documents and offers document metadata creation and storage, as well as AI services that are directly deployed to analyze documents
- Provides audit on blockchain receipts, embedding an Ethereum Node
WHAT DOES THE WIZKEY NODE (WKN) PROVIDE?
WKN enforces privacy since sensitive contents never leave customer domain and no data is shared with WizKey at any time.
WKN verifies content notarized by clients, ensuring documents and transactions integrity.
WHAT ARE THE WIZKEY SERVICES (WKS)?
WizKey Services (WKS) are a single tenant cloud hosted services released by WizKey on AWS that implement routing and login services.
WHAT DO WIZKEY SERVICES (WKS) DO?
- Authenticate users ensuring Know Your Customer (KYC) across different data rooms
Provide WizKey Node address book when needed to fulfill settlement operations.
The platform Define has not been publicly released yet, but it is being used for few pilot operations with big Italian banks. The first one should be concluded by the first half of June 2020.
4. Link the whitepaper, documentation portals, and source code for the system(s) that interact with the proposed collateral, and all relevant Ethereum addresses. If the system is complex, schematic(s) are especially appreciated.
We can host an online presentation of our platform for the community, that will be likely hosted on Zoom or similar apps; we can’t wait to show you our platform to receive comments and reviews in the context of this application.
Please refer to the section above for a quick overview of the platform.
We haven’t released a whitepaper nor the code has been publicly made available. As we’re a private company backed by private investors, we decided to go this way in accordance with their requests and to protect their investment for the initial phase. Once the platform will be publicly released, everything will be disclosed.
Here are the links to the smart contracts we deployed on Mainnet:
There are no audits available at the moment but take a look at the smart contract deployed referring to the links above.
In any case the project has been validated by the financial institutions we are working with, regulators and Horizon 2020 programme.
WizKey is part of the Italian Fintech district, a network of fintech companies based in Milan.
We’re also part of the Enterprise Ethereum Alliance and one of the initial testers of their testnet.
Here you can find the links to our social:
The collateral is used in the context of factoring programmes as well as securitisation programmes.
8. Does one organization bear legal responsibility for the collateral? What jurisdiction does that organization reside in?
WizKey is the linking point between the companies being financed and Maker DAO and is responsible for the repayment of the collateralised debt positions. WizKey ensures Maker DAO that the final beneficiary of the loan, the Client / company, is obliged to repay the loan and that this obligation is covered by a AA insurance policy, that can then transferred to Makerd DAO fundation in case of any event adversely affecting WizKey. WizKey and the companies that will take part to the experimentation reside in Italy.
The exchange of the asset usually occurs in Italy through specific operations on the primary market, but there are some international commercial papers programmes available as well.
10. (Optional) Has your project obtained any legal opinions or memoranda regarding the regulatory standing of the token or an explanation of the same from the perspective of any jurisdiction? If so, those materials should be provided for community review.
Securitisation and factoring programmes are widely recognised and used in Italy. We have presented the project to Bank of Italy in September 2019 and made a new presentation in April 2020 and received a very good feedback. The banks and servicers that are working with us do not see any legal problem with respect to the tokenisation of loans and invoices on Ethereum. Furthermore the overall legal design of the platform has been conceived by two very well recognised lawyers that are the CEO and President of the BoD of WizKey.
11. (Optional) Describe whether there are any regulatory registrations for the token and provide related documentation (including an explanation of any past or existing interactions with any regulatory authorities, regardless of jurisdiction), if applicable.
No regulatory registrations are required
DeFiNe is the oracle for the collateral. DeFiNe gathers all the data from the debtor and double checks it from public sources.
13. (Optional) List any parties interested in taking part in liquidations for the proposed Collateral type
We are contacting different factors in order to be the buyers of last instance of the invoice should the company fail to repay the loan from Maker DAO. The debt is in any case covered by the AA insurance policy.