Page 23 - PROJECT KHOKHA 2

The debenture token life cycle
Figure 6 below provides an overview of the debenture token life cycle – mainly focusing on the primary market.
Figure 6: Debenture token lifecycle
THE PROOF-OF-CONCEPT
2
Bid Cleared Member SAMOS/ Rand reserve wCBDC account payment
Custodian
Held on behalf of owner
• Collateral service
5
Advertise
Announce 1 debenture
auction for the week
Allocate
effected
Issue
Settled
Security transferred
Allocate
3 debentures to and debenture 8
4
ISIN requested
6
7
wining bids
created
Process implemented ‘on chain’
Matured
Khokha Hub
Notional and interest value paid in wCBDC
Process simulted ‘off chain’
The steps in the debenture token life cycle are:
1. FMD may decide to hold a debenture auction and, if so, it is announced on a Wednesday.
2. Participants bid in the auction.
3. The FMD accepts bids and allocates debentures.
4. The FMD issues the debenture tokens on the Khokha Hub utilising a debenture token module. The ISIN is obtained from the ISIN simulator for registration along with other pertinent data such as the value of a contract, in the NFT5 embodying the debenture token.
5. The terms of exchange are recorded on the Khokha Hub’s DLT through the creation of a DvP smart contract address specific to the transaction to which the buyer must send wCBDC. The DvP smart contract, as part of the debenture token module, holds the debenture token in escrow.
6. The buyer sends wCBDC to the DvP smart contract, which verifies the token data against ISIN data, and if it matches and sufficient wCBDC was paid, the ownership of the debenture token passes to the buyer and the wCBDC is passed to the FMD. If any of the steps fail, funds are returned to the buyer and the debenture is returned to the FMD.
7. The buyer holds the debenture token in a custodial wallet provided by its CSDP, that is, commercial bank, on the TTP (i.e. the Khokha Hub). The debenture tokens are also locked in these wallets to enable the issuance of the FDM Tokens, as a synthetic instrument for trade in the secondary market against Khokha Tokens.
8. When a debenture token matures, the FMD makes payment on the principal and interest owed to
a settlement contract per ISIN – it is also possible to aggregate liability across multiple debenture tokens. The DvP smart contract distributes wCBDC owed to relevant beneficiaries. A secondary smart contract is used to help settle third-party liabilities incurred against the debenture using FDM Tokens in the secondary market (like MaFISI in the current market).
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