LockTon
Crypto Bank
Concept Lockton
Presentation
Concept
[ Lockton ]
Nowadays digital assets become an actual and effective mechanism.
In 2021, crypto market capitalization exceeded three trillion dollars for the first time in history* and has a clear upward trend in the future.
* according to CoinGecko
In 2021, crypto market capitalization exceeded three trillion dollars for the first time in history* and has a clear upward trend in the future.
* according to CoinGecko
MARKET AND CONCEPT OVERVIEW
Investment banks, funds, and international corporations are seriously considering blockchain projects in their portfolio due to the increasing adoption of technology by institutional market participants.
At the same time, the state financial authorities are facing the fact that the era of the introduction of digital assets as a full-fledged financial instrument is inevitable. It is more logical to accept and regulate a new market than to oppose it.
Unfortunately, most of the services provided in the blockchain sector are still fragmented, not user-friendly, and require high technical skills from users. Foremost it was facilitated by the ideology of the emergence of the blockchain as a means of making transactions without a regulator and trust between the parties.
At the same time, the state financial authorities are facing the fact that the era of the introduction of digital assets as a full-fledged financial instrument is inevitable. It is more logical to accept and regulate a new market than to oppose it.
Unfortunately, most of the services provided in the blockchain sector are still fragmented, not user-friendly, and require high technical skills from users. Foremost it was facilitated by the ideology of the emergence of the blockchain as a means of making transactions without a regulator and trust between the parties.
Therefore, some part of the crypto community has a lack of practical understanding of the blockchain. Losing an intermediary such as a service provider, bank, or service administration, users take full responsibility for their actions, including data protection, risk management, due diligence, and so on.
At the moment, we are witnessing a serious distortion of the crypto market in favor of exchange platforms and a lack of service part.
Can you imagine that in a classic financial world, there would be 1,000 times more exchanges than banks? This state of affairs suggests that the blockchain sector as an industry is still mostly experiencing growth challenges.
However, blockchain technology can reduce costs and eliminate potential bottlenecks. Such a system and its professional service part operator are able to provide a high standard of reliability and safety.
Comparing a blockchain network with a developed democratic social structure, we can conclude that even the best democracy in the world will quickly slide into anarchy if no services are provided with minimal regulation and service.
At the moment, we are witnessing a serious distortion of the crypto market in favor of exchange platforms and a lack of service part.
Can you imagine that in a classic financial world, there would be 1,000 times more exchanges than banks? This state of affairs suggests that the blockchain sector as an industry is still mostly experiencing growth challenges.
However, blockchain technology can reduce costs and eliminate potential bottlenecks. Such a system and its professional service part operator are able to provide a high standard of reliability and safety.
Comparing a blockchain network with a developed democratic social structure, we can conclude that even the best democracy in the world will quickly slide into anarchy if no services are provided with minimal regulation and service.
Nowadays banking institutions are one of the main financial institutions. It is quite obvious that with the growth of the number of jurisdictions that adopted blockchain technologies, such financial as “Banks 2.0” will not be the same in a few years.
Lockton Bank is a business structure providing demanded banking functionality in the digital assets segment, built in compliance with the global trends of blockchain project regulation, which allows to scale in progressive crypto jurisdictions.
Let’s take a closer look at the essence through problems and solutions in a few examples:
Lockton Bank is a business structure providing demanded banking functionality in the digital assets segment, built in compliance with the global trends of blockchain project regulation, which allows to scale in progressive crypto jurisdictions.
Let’s take a closer look at the essence through problems and solutions in a few examples:
How to store funds in a safe?
PROBLEM:
Loss of funds
2017 - 2021
Total cryptocurrency value received by illicit addresses
Total cryptocurrency value received by illicit addresses
This graph shows the loss of digital assets in dollar equivalent.
They were lost for various reasons - so-called scam projects, crypto-exchange hacking, theft of funds because of fraudulent actions from private wallets, and loss of keys. The imperfect security solutions of various platforms are the key reason for it, in addition to the carelessness of the investors themselves.
They were lost for various reasons - so-called scam projects, crypto-exchange hacking, theft of funds because of fraudulent actions from private wallets, and loss of keys. The imperfect security solutions of various platforms are the key reason for it, in addition to the carelessness of the investors themselves.
Loss of funds
2011 - 2021
Stolen funds flow via entities
Stolen funds flow via entities
SoLution
Custom custodian storage from Lockton.
Lockton Custodial Storage is organized as follows:
· The control of transactions is based on multi-signature technology, which requires approval of the transaction by several parties (user, bank, third-party arbitrators);
· API to ensure auditing and integration with third-party systems;
· Binding (anchoring) of transactions in a public blockchain (the hash of the transaction is transferred to a public blockchain network, which allows the event to be irreversibly fixed without disclosure of data);
· complete customization of storage modes embedded in the platform architecture;
· mandatory KYC/AML procedures;
This set of features provides almost unlimited opportunities to build a variety of financial products for the consumer of any level
Lockton Custodial Storage is organized as follows:
· The control of transactions is based on multi-signature technology, which requires approval of the transaction by several parties (user, bank, third-party arbitrators);
· API to ensure auditing and integration with third-party systems;
· Binding (anchoring) of transactions in a public blockchain (the hash of the transaction is transferred to a public blockchain network, which allows the event to be irreversibly fixed without disclosure of data);
· complete customization of storage modes embedded in the platform architecture;
· mandatory KYC/AML procedures;
This set of features provides almost unlimited opportunities to build a variety of financial products for the consumer of any level
Human factor:
· funds stealing because of stolen password;
· an error by an exchange employee that resulted in the loss of clients’ funds;
· transfer funds forced by extortion.
History knows cases when the owners of exchanges and mining pools having access snatched users’ funds.
· funds stealing because of stolen password;
· an error by an exchange employee that resulted in the loss of clients’ funds;
· transfer funds forced by extortion.
History knows cases when the owners of exchanges and mining pools having access snatched users’ funds.
PROBLEM:
SoLution
The architecture of multi-level storage has an exception to this risk.
Storage LocktonBank is divided into “hot”, “warm” and “cold” zones. By configuring the account the user distributes the terms and conditions of the asset storage based on their own needs.
Storage LocktonBank is divided into “hot”, “warm” and “cold” zones. By configuring the account the user distributes the terms and conditions of the asset storage based on their own needs.
· 5% of the total deposit is kept in the “hot” zone;
· 15% – in the “warm” zone;
· 80% – in the “cold” zone.
Therefore, the number of procedures depends on the amount of assets to be performed.
· A query from the user account is enough to access the “hot” zone;
· Access to the “warm” zone requires the signatures of the user and a representative of the monitoring department. It means simultaneous their signing to get access to “warm” storage when the system allows to make specific operations;
To access a “cold” storage facility, the signatures of the customer, the monitoring department, as well as a third-party arbitrator (special company or regional bank partner) are required.
A user can assign for the convenience auto replenishment of the “hot zone” when the balance is reduced from the nominal value, as well as to set a limit on the frequency of auto-replenishment (for example, once a day).
In “cold storage”, users' assets are fragmented and distributed across hundreds of hardware slots on the principle of mathematical redundancy, making physical theft of the slot useless. In case of theft of less than 25% of slots, information can be restored in 100% volume. Moreover, slots are distributed geographically so one cluster cannot store more than 20 % of slots.
In addition, any user can assign additional security steps (for example, when placing large assets) like personal presence, and additional signatures from trusted persons or organizations.
The KYC procedure is mandatory for all bank clients. 3D secure function and organization of white output lists are also available.
· 15% – in the “warm” zone;
· 80% – in the “cold” zone.
Therefore, the number of procedures depends on the amount of assets to be performed.
· A query from the user account is enough to access the “hot” zone;
· Access to the “warm” zone requires the signatures of the user and a representative of the monitoring department. It means simultaneous their signing to get access to “warm” storage when the system allows to make specific operations;
To access a “cold” storage facility, the signatures of the customer, the monitoring department, as well as a third-party arbitrator (special company or regional bank partner) are required.
A user can assign for the convenience auto replenishment of the “hot zone” when the balance is reduced from the nominal value, as well as to set a limit on the frequency of auto-replenishment (for example, once a day).
In “cold storage”, users' assets are fragmented and distributed across hundreds of hardware slots on the principle of mathematical redundancy, making physical theft of the slot useless. In case of theft of less than 25% of slots, information can be restored in 100% volume. Moreover, slots are distributed geographically so one cluster cannot store more than 20 % of slots.
In addition, any user can assign additional security steps (for example, when placing large assets) like personal presence, and additional signatures from trusted persons or organizations.
The KYC procedure is mandatory for all bank clients. 3D secure function and organization of white output lists are also available.
Example:
Low yield deposits
Deposits with low yields in the fiat sector.
PROBLEM:
In the US today, the rate on deposits in a classic bank is about zero, in Switzerland the rates on deposits are negative.
SoLution
Deposits at Lockton Bank offer a higher yield rate even for stablecoins, as the digital asset market has great technological capabilities, which may include mechanisms such as participation in DEFI liquidity pools, blockchain lending, steaking pool, and etc.
The financial operations sector requires any threats to the loss of user deposits, including the unlikely ones, are considered. What can Lockton Bank offer in this regard?
PROBLEM:
SoLution
Lockton Bank provides deposit insurance in case of loss due to the fault of the bank.
The compensation will be paid from a special fund organized by Lockton Bank.
The compensation will be paid from a special fund organized by Lockton Bank.
Traditional financial institutions meet a lot of risks and costs regarding loan activity such as credit assessment, processing mortgages, litigation, and handling all foreclosure sales.
PROBLEM:
SoLution
Lending in the digital assets sector eliminates negative consequences of the “human factor” and the appearance of problematic debts.
In crypto loans, other crypto-assets serve as credit security and they are automatically foreclosed.
So, it is possible to get a loan in USDT with bitcoins’ collateral.
A client receives a warning with an offer to replenish the collateral or to return the borrowed funds when collateral value is at the critical value and possible to be foreclosed.
The automated foreclosure is done for repayment in the following cases:
· the borrower ignores warnings;
· the lowering threshold for the collateral value is reached;
· the term of lending is exceeded.
In crypto loans, other crypto-assets serve as credit security and they are automatically foreclosed.
So, it is possible to get a loan in USDT with bitcoins’ collateral.
A client receives a warning with an offer to replenish the collateral or to return the borrowed funds when collateral value is at the critical value and possible to be foreclosed.
The automated foreclosure is done for repayment in the following cases:
· the borrower ignores warnings;
· the lowering threshold for the collateral value is reached;
· the term of lending is exceeded.
Loss of access to assets due to death of the owner, loss of access keys to corporate assets due to death of the holder, or loss of legal capacity.
There are many such examples in modern history. It is worth remembering the case with the Canadian exchange Quadriga CX, when due to the death of Gerald Cotten (the head of the company), the access to digital assets of more than 75 thousand users was lost.
There are many such examples in modern history. It is worth remembering the case with the Canadian exchange Quadriga CX, when due to the death of Gerald Cotten (the head of the company), the access to digital assets of more than 75 thousand users was lost.
PROBLEM:
SoLution
In this case, Lockton Bank provides two ways to solve the problem. If the asset is located based on collective access (signed ownership pool), access to the asset is determined by a signature quorum of 2/3 of the total ownership.
In the second case, if the asset is registered as an individual one, the Lockton Bank client has the opportunity to draw up a contract for the transfer of a digital asset held by the bank in the event of his or her death. If the terms of the contract are met, after verifying the death case by request to the competent authorities in the user’s jurisdiction, the bank will activate the contract. The content of which is available to only two parties (the originator and the new recipient).
In the second case, if the asset is registered as an individual one, the Lockton Bank client has the opportunity to draw up a contract for the transfer of a digital asset held by the bank in the event of his or her death. If the terms of the contract are met, after verifying the death case by request to the competent authorities in the user’s jurisdiction, the bank will activate the contract. The content of which is available to only two parties (the originator and the new recipient).
Blocking of user funds due to possible unreliability of their origin.
PROBLEM:
Compliance with regulatory policies
Blocking the user's funds due to the possible unreliability of their origin.
SoLution
In Lockton Bank, the receipt of assets passes preliminary AML verification in cooperation with the relevant providers (ChainAnalysis, Elliptic, Cipher-Trace, Crystal Blockchain and etc.), which qualitatively reduces the probability of receipt of “dirty” assets.
With the growing acceptance of the digital asset sector by institutional market participants, there is an increasing need for corporate services in this segment.
PROBLEM:
SoLution
LocktonBank will provide solutions for the corporate sector, as well as any classic bank, including corporate deposits, APIs for accounting and parsing, which are used in auditing, asset verification at acceptance, payment automatization, issuance of corporate cards, payment of invoices, etc. (availability of services depends on the jurisdiction of the company).
What solutions does Lockton provide for classic banks that want to implement work with crypto assets?
PROBLEM:
SoLution
The Lockton Bank solution is a partner program designed as a modular, interbank platform with a full range of crypto-asset services. By joining our system, any bank will be able to provide a full range of services on its behalf, becoming one of the regional partners. Also, the bank partner can become a regional arbitrator and receive a reward for each signed transaction.
The private blockchain system registers every transaction in the public blockchain network without revealing the details of the transaction. In this way, all authorized members of the network will be able to prove to each other all the actions performed and their irreversibility.
The private blockchain system registers every transaction in the public blockchain network without revealing the details of the transaction. In this way, all authorized members of the network will be able to prove to each other all the actions performed and their irreversibility.
HOW CRYPTO BANK WORKS
Crypto Bank is a multi-blockchain platform that performs a number of banking functions.
The purpose of the platform is the implementation of the service and payment infrastructure, which will provide the necessary tools to work with crypto assets in accordance with all the requirements of the modern legal field and will connect the crypto-currency sector with the financial one.
LocktonBank allows clients to store digital assets, place deposits, receive loans in crypto-currency, and make cards payment through an integrated fiat gateway. In the future integration of exchange traded products (crypto-ETP) is possible.
However, there is a situation where large banking systems, in most cases, still do not work with crypto assets, or their service in this segment is very limited. It is, due to:
· gaps in adequate regulation creating permissive legal mechanisms for the functioning of such institutions;
· the lack of the necessary competencies of large financial structures for the implementation of such projects from both technological and organizational sides.
While the traditional banking system is waiting, the development of the crypto industry takes place with increased dynamics.
We are convinced that the new stage of “crypto-nomics” will be the formation of a hybrid financial system, providing traditional services, along with crypto ones.
The purpose of the platform is the implementation of the service and payment infrastructure, which will provide the necessary tools to work with crypto assets in accordance with all the requirements of the modern legal field and will connect the crypto-currency sector with the financial one.
LocktonBank allows clients to store digital assets, place deposits, receive loans in crypto-currency, and make cards payment through an integrated fiat gateway. In the future integration of exchange traded products (crypto-ETP) is possible.
However, there is a situation where large banking systems, in most cases, still do not work with crypto assets, or their service in this segment is very limited. It is, due to:
· gaps in adequate regulation creating permissive legal mechanisms for the functioning of such institutions;
· the lack of the necessary competencies of large financial structures for the implementation of such projects from both technological and organizational sides.
While the traditional banking system is waiting, the development of the crypto industry takes place with increased dynamics.
We are convinced that the new stage of “crypto-nomics” will be the formation of a hybrid financial system, providing traditional services, along with crypto ones.
HOW CRYPTO BANK WORKS
It is obvious that almost every person or company uses banking services. Banks as a financial structure are reliable and credible for the users.
At the same time, not all people have the appropriate knowledge, and often financial literacy, to successfully interact with professional participants of the financial market.
Therefore, there is an opinion that people who do not understand crypto assets but want to buy them, first of all, go to banks.
Trust gives an advantage. A bank with crypto-currency and traditional services has all the prerequisites for increased demand compared to other institutions of this market, for example, such as:
· exchanges (high threshold of perception, complex interaction, high risk of loss of funds in non-core usage);
· trade intermediaries (low level of stability and security).
The application of new tools may seem to some interested audiences to be unclear and difficult.
Cryptobank in turn can provide usual and “classic” functionality.
For more advanced digital asset holders, crypto banks will be convenient, as they combine most of the current services in the same place with a priority on the security of storage.
The services of Cryptobank can be useful for retail sellers in using crypto-currencies to cover the demand of purchases.
Our target audience:
· individuals as retail users;
· investors, using the custodian of crypto-assets and bank’s deposit programs;
· corporate clients – for transferring fiat funds into crypto-assets and vice versa, for ensuring operational activities (contracts, payments), building the payment structure of the company, salary programs, lending and depositing funds for a short and long term
· gambling and arbitration sector – to build a single solution for multi-currency transactions, payment acceptance, and service transactions;
· fundraising projects (ICO, IDO, STO, and others) – to store liquidity;
· small exchanges to diversify their risks by using professional custodians for their digital assets;
· at last, classic banks and financial institutions expanding their own service functionality.
At the same time, not all people have the appropriate knowledge, and often financial literacy, to successfully interact with professional participants of the financial market.
Therefore, there is an opinion that people who do not understand crypto assets but want to buy them, first of all, go to banks.
Trust gives an advantage. A bank with crypto-currency and traditional services has all the prerequisites for increased demand compared to other institutions of this market, for example, such as:
· exchanges (high threshold of perception, complex interaction, high risk of loss of funds in non-core usage);
· trade intermediaries (low level of stability and security).
The application of new tools may seem to some interested audiences to be unclear and difficult.
Cryptobank in turn can provide usual and “classic” functionality.
For more advanced digital asset holders, crypto banks will be convenient, as they combine most of the current services in the same place with a priority on the security of storage.
The services of Cryptobank can be useful for retail sellers in using crypto-currencies to cover the demand of purchases.
Our target audience:
· individuals as retail users;
· investors, using the custodian of crypto-assets and bank’s deposit programs;
· corporate clients – for transferring fiat funds into crypto-assets and vice versa, for ensuring operational activities (contracts, payments), building the payment structure of the company, salary programs, lending and depositing funds for a short and long term
· gambling and arbitration sector – to build a single solution for multi-currency transactions, payment acceptance, and service transactions;
· fundraising projects (ICO, IDO, STO, and others) – to store liquidity;
· small exchanges to diversify their risks by using professional custodians for their digital assets;
· at last, classic banks and financial institutions expanding their own service functionality.
WHO NEEDS CRYPTO BANKS AND WHO IS OUR USER?
LOCKTON BANK CORE FUNCTIONALITY
01
01
Income deposits
02
02
Cold storage;
03
03
Crypto loans;
04
04
Corporate payment service
assistance for organizations to make payments in crypto-currency, filtration of dirty assets (in cooperation with AML provide), clearing (access to service depends on the jurisdiction of the company);
05
05
Instant Micropayments Service
- For all bank customers, there is an application for Instant micropayments, followed by clearing within the bank.
- P2P exchange service
- crypto to crypto;
- crypto to fiat;
- fiat to crypto;
- Visa Card Issue;
Automated crypto/fiat payments with standard spending limits (the access depends on the jurisdiction).
Features of Lockton Bank:
Traditional bank standards
01
Multi-level access to assets
02
Fragmented cold storage
03
High customization rate
04
Advantages of the exchange
05
Priority for security by increasing the number of procedural steps
06
Faster market entry (as business structure)
07
Smaller pool for market making
08
Unlimited scalability in services
09
Freer market niche
10
Reputation of banking institution
11
Due to the features of the Lockton project, we do not have direct competitors, but with certain redemptions, three categories of companies with similar target Audience can be assigned to them:
1) Crypto Exchanges (Binance, KuCoin, FTX);
2) Crypto Banks and Crypto Storage Services:
Cryptobank - https://cryptobank.ventures/eng/index.html
https://www.crypto-bank.io
The project announces a new system of work with AI. Its actual application is not specified. It also aims to attract funds through ICO, no cold storage system, no fiat gateway, and no licenses.
3) Blockchain.info, Trustwallet, and BitPay crypto wallets are not real banks, outdated “hot” storage, archaic security solutions, lack of financial products, lack of technical support, not a custodial solution.
4) “Cold” wallets (Trezor, Ledger). A loss of “USB drive” means a loss of the funds. No deposit product, only storage. Purchase on the secondary market increases the probability of losing funds.
5) Custom custodians – GK8 (only storage without other functionality), Curv (cloud storage without other functionality), Solaris (multi-signature storage), Gemini custody (multi-signature storage), Metaco, Anchorage.
Each of the representatives is limited in functionality and has primitive tools for customization. There are no financial products.
6) Staking platforms: Everstake, Figment Networks, MyCointainer, Stake Capital, and many others. Platforms connect projects to provide liquidity at the expense of their users. Limited asset security, and lack of financial products.
Services provided by LocktonBank competitors are fragmented and do not represent a single service, LocktonBank is able to provide the full range of current services due to its architecture.
Having almost the same costs, competitors provide only a limited range of services.
1) Crypto Exchanges (Binance, KuCoin, FTX);
2) Crypto Banks and Crypto Storage Services:
Cryptobank - https://cryptobank.ventures/eng/index.html
- standard cold wallet with the name “Bank”;
- standard security solution;
- lack of flexibility;
- lack of ability to build financial products;
- lack of fiat gateway;
- no 24/7 support center;
- no license information;
- the project is aimed at ICO - the sale of unsecured assets, which is not allowed for the bank.
https://www.crypto-bank.io
The project announces a new system of work with AI. Its actual application is not specified. It also aims to attract funds through ICO, no cold storage system, no fiat gateway, and no licenses.
3) Blockchain.info, Trustwallet, and BitPay crypto wallets are not real banks, outdated “hot” storage, archaic security solutions, lack of financial products, lack of technical support, not a custodial solution.
4) “Cold” wallets (Trezor, Ledger). A loss of “USB drive” means a loss of the funds. No deposit product, only storage. Purchase on the secondary market increases the probability of losing funds.
5) Custom custodians – GK8 (only storage without other functionality), Curv (cloud storage without other functionality), Solaris (multi-signature storage), Gemini custody (multi-signature storage), Metaco, Anchorage.
Each of the representatives is limited in functionality and has primitive tools for customization. There are no financial products.
6) Staking platforms: Everstake, Figment Networks, MyCointainer, Stake Capital, and many others. Platforms connect projects to provide liquidity at the expense of their users. Limited asset security, and lack of financial products.
Services provided by LocktonBank competitors are fragmented and do not represent a single service, LocktonBank is able to provide the full range of current services due to its architecture.
Having almost the same costs, competitors provide only a limited range of services.
COMPETITORS
Assessment of key criteria allows to make a clear conclusion in favor of Cryptobank.
At the same time, it is important to understand that both structures from an organizational point of view are very labor-intensive and require high technological expertise.
Fundamental differences lie in the radically different purposes of these structures, which affect both their internal organization and subsequent management and development.
An exchange is primarily a platform for carrying out high-risk transactions with all the consequences, both for all participants and organizers. All crypto exchange processes should be carried out with minimal time gaps. The main exchange’s purpose is to trade according to the volatility of assets. This means that the architecture of the exchange is mostly tuned to efficiency.
In fact, the CEX has full control over the funds of its users. In these circumstances, it is extremely difficult to ensure that the user has control over its assets and that the funds are fully secured.
Any controversial situation with users, not to mention possible technical problems and failures, will have huge, often fatal reputational and financial losses. A delay in service of trading with “leverage” at least for a second can lead to serious losses.
Time and technological admissions of the exchange do not allow to ensure a proper level of security. So the information agenda on a regular basis is presented by news on hacks or closures of exchanges.
Modern crypto bank, functioning in the current legal field, has a high chance to transform into a large, by world standards, a financial platform with a wide range of services.
At the same time, it is important to understand that both structures from an organizational point of view are very labor-intensive and require high technological expertise.
Fundamental differences lie in the radically different purposes of these structures, which affect both their internal organization and subsequent management and development.
An exchange is primarily a platform for carrying out high-risk transactions with all the consequences, both for all participants and organizers. All crypto exchange processes should be carried out with minimal time gaps. The main exchange’s purpose is to trade according to the volatility of assets. This means that the architecture of the exchange is mostly tuned to efficiency.
In fact, the CEX has full control over the funds of its users. In these circumstances, it is extremely difficult to ensure that the user has control over its assets and that the funds are fully secured.
Any controversial situation with users, not to mention possible technical problems and failures, will have huge, often fatal reputational and financial losses. A delay in service of trading with “leverage” at least for a second can lead to serious losses.
Time and technological admissions of the exchange do not allow to ensure a proper level of security. So the information agenda on a regular basis is presented by news on hacks or closures of exchanges.
Modern crypto bank, functioning in the current legal field, has a high chance to transform into a large, by world standards, a financial platform with a wide range of services.
WHY THE BANK AND NOT AN EXCHANGE?
Today the competition that exists on the crypto market requires new products to focus on the direction of PR and marketing.
For example, the largest CEX Binance spent about half of the attracted funds on marketing and promotion of the emerging ecosystem.
The most successful tools to promote new crypto products are the following:
Bounty companies pursue similar goals but engage opinion leaders from different communities, which allows to draw attention to the project to several types of the target audience.
Since the bank does not issue unsecured assets, it is possible to mass promote the product in global social networks.
For example, the largest CEX Binance spent about half of the attracted funds on marketing and promotion of the emerging ecosystem.
The most successful tools to promote new crypto products are the following:
- Run AirDrop & Bounty campaigns;
Bounty companies pursue similar goals but engage opinion leaders from different communities, which allows to draw attention to the project to several types of the target audience.
- Community management, communication in niche media and social networks;
Since the bank does not issue unsecured assets, it is possible to mass promote the product in global social networks.
- SERM (Search Engine Reputation Management);
- Partner programs to attract the audience;
- Work with media and niche experts;
- Content marketing;
MARKETING
LEGAL BASIS
As is known, the status of the bank, as well as other financial organizations requires obtaining the appropriate license in all regulated jurisdictions.
However, most early crypto banks did not have them, so this name was used only to improve image and trust, rather than using “by law”. Such platforms only imitated banking functions, in fact, being specialized investment funds, payment organizations EMI (Electronic Money Institution), or trading crypto platforms.
Taking into consideration the wave of large frauds and “Ponzi” schemes on the crypto market in 2017-2019, the international community and regulators today adhere to the strategy of creating a regulated corridor, in compliance with all modern requirements of financial security and compliance with AML/FT rules.
This is evidenced by the large array of legislative measures that most progressive jurisdictions developed between 2020 and 2021, and this process is still ongoing.
All these changes can be reduced to 3 understandable approaches to the regulation of the crypto market: “Impossible”; “It is possible, but not known how” and “It is possible and regulation is formed as”.
Therefore, the market is moving faster than most legislators creating legally permissible circumventions of legal and business solutions for the positioning of crypto banks. It can be an alternative financial or FinTech license, or so on. CoFi is an affiliate program with traditional financial institutions and partner banks.
Lockton Bank chooses a clear and regulated jurisdiction with an open and up-to-date policy regarding the regulation of virtual assets. This makes it possible to officially implement a fiat gateway solution for handling crypto-assets and fiat funds.
Let’s overview the main legal and organizational developments in different jurisdictions.
The past five years had been a period of active regulatory transformation of the digital asset market. FATF (Financial Action Task Force on Money Laundering) is the main “trendsetter” of key legal changes in this sphere.
The organization developed a Guidance on the so-called “virtual assets”, which provided key definitions and potential risks of AML/FT. Its provisions had been implemented in the legislation of most of the world’s leading jurisdictions. FATF continues to develop supplements and new guidelines on the subject, thereby creating universal regulatory guidelines for different jurisdictions and global harmonization of those processes.
Currently, the regulatory basis for the crypto sphere consists of three main groups of issues: licensing requirements for companies, compliance (KYC/AML/FT), and the ability of banks to service fiat operations for the project.
Current international practice suggests that the State regulator could be an authority responsible stock market (the Securities Commission), the Central Bank (or its analogs), or their cooperation.
On the above mentioned basis, the regulatory component is formed. The most balanced solution is the combination of the interaction of these authorities, which leads to the absence of inflection in one direction or another. There are examples of jurisdictions with a high reputation component where the actions of a single regulator have led to the formation of a non-viable or uncomfortable situation.
A case in point is the United States, where the Securities and Exchange Commission (SEC), through an intensive restrictive policy, had a major impact on the development of crypto projects, hindering the development of the market.
Just as illustrative is the example of the UAE, where the local banking environment completely ignores any interaction with crypto assets, even if for licensed local crypto companies.
Increasing loyalty to the digital asset market in these jurisdictions is just a matter of time.
However, a number of jurisdictions have already managed to attract a significant number of large crypto projects:
The issue and public offering of tokens must be registered in The Swiss Financial Market Supervisory Authority (FINMA). Swiss law also requires mandatory KYC/AML procedures.
Switzerland is one of the leading countries in the practical application of blockchain technologies and cryptocurrency turnover. There are many ways to make payments with crypto including for taxes. Meanwhile, the Swiss authorities intend to further promote the use of digital assets and the integration of blockchain technologies. Several Swiss banks, such as Falcon Private Bank and Julius Baer, allow direct transfers and deposits with cryptocurrencies.
At the same time, a number of European countries have introduced the practice of separate licenses operating in the crypto segment, as well as implemented FATF recommendations on mandatory KYC/AML procedures. In addition, favorable tax regimes and loyal policies towards digital assets in countries such as Estonia and Gibraltar have enabled the incorporation of projects such as Augur, CoinMetro, and Exscudo.
As is known, the status of the bank, as well as other financial organizations requires obtaining the appropriate license in all regulated jurisdictions.
However, most early crypto banks did not have them, so this name was used only to improve image and trust, rather than using “by law”. Such platforms only imitated banking functions, in fact, being specialized investment funds, payment organizations EMI (Electronic Money Institution), or trading crypto platforms.
Taking into consideration the wave of large frauds and “Ponzi” schemes on the crypto market in 2017-2019, the international community and regulators today adhere to the strategy of creating a regulated corridor, in compliance with all modern requirements of financial security and compliance with AML/FT rules.
This is evidenced by the large array of legislative measures that most progressive jurisdictions developed between 2020 and 2021, and this process is still ongoing.
All these changes can be reduced to 3 understandable approaches to the regulation of the crypto market: “Impossible”; “It is possible, but not known how” and “It is possible and regulation is formed as”.
Therefore, the market is moving faster than most legislators creating legally permissible circumventions of legal and business solutions for the positioning of crypto banks. It can be an alternative financial or FinTech license, or so on. CoFi is an affiliate program with traditional financial institutions and partner banks.
Lockton Bank chooses a clear and regulated jurisdiction with an open and up-to-date policy regarding the regulation of virtual assets. This makes it possible to officially implement a fiat gateway solution for handling crypto-assets and fiat funds.
Let’s overview the main legal and organizational developments in different jurisdictions.
The past five years had been a period of active regulatory transformation of the digital asset market. FATF (Financial Action Task Force on Money Laundering) is the main “trendsetter” of key legal changes in this sphere.
The organization developed a Guidance on the so-called “virtual assets”, which provided key definitions and potential risks of AML/FT. Its provisions had been implemented in the legislation of most of the world’s leading jurisdictions. FATF continues to develop supplements and new guidelines on the subject, thereby creating universal regulatory guidelines for different jurisdictions and global harmonization of those processes.
Currently, the regulatory basis for the crypto sphere consists of three main groups of issues: licensing requirements for companies, compliance (KYC/AML/FT), and the ability of banks to service fiat operations for the project.
Current international practice suggests that the State regulator could be an authority responsible stock market (the Securities Commission), the Central Bank (or its analogs), or their cooperation.
On the above mentioned basis, the regulatory component is formed. The most balanced solution is the combination of the interaction of these authorities, which leads to the absence of inflection in one direction or another. There are examples of jurisdictions with a high reputation component where the actions of a single regulator have led to the formation of a non-viable or uncomfortable situation.
A case in point is the United States, where the Securities and Exchange Commission (SEC), through an intensive restrictive policy, had a major impact on the development of crypto projects, hindering the development of the market.
Just as illustrative is the example of the UAE, where the local banking environment completely ignores any interaction with crypto assets, even if for licensed local crypto companies.
Increasing loyalty to the digital asset market in these jurisdictions is just a matter of time.
However, a number of jurisdictions have already managed to attract a significant number of large crypto projects:
- Singapore,
- Switzerland
The issue and public offering of tokens must be registered in The Swiss Financial Market Supervisory Authority (FINMA). Swiss law also requires mandatory KYC/AML procedures.
Switzerland is one of the leading countries in the practical application of blockchain technologies and cryptocurrency turnover. There are many ways to make payments with crypto including for taxes. Meanwhile, the Swiss authorities intend to further promote the use of digital assets and the integration of blockchain technologies. Several Swiss banks, such as Falcon Private Bank and Julius Baer, allow direct transfers and deposits with cryptocurrencies.
- Germany
At the same time, a number of European countries have introduced the practice of separate licenses operating in the crypto segment, as well as implemented FATF recommendations on mandatory KYC/AML procedures. In addition, favorable tax regimes and loyal policies towards digital assets in countries such as Estonia and Gibraltar have enabled the incorporation of projects such as Augur, CoinMetro, and Exscudo.
- Thus, the strategy to increase transparency and to select a regulated status for significant projects is trended. In particular, the world’s largest crypto exchange Binance between 2021 and 2022 placed its headquarters in Bahrain and obtained a license that allows the crypto exchange to operate the entire range of financial products.
OVERVIEW OF JURISDICTIONS TO BE CONSIDERED
FOR IMPLANTATION OF LOCKTONBANK
FOR IMPLANTATION OF LOCKTONBANK
Recent years, Ukraine holds a leading position in the annual global crypto adoption rankings.
The key indicators for Ukraine are the following:
The key indicators for Ukraine are the following:
- the percentage of the population that owns crypto-assets (top-1);
- the total amount of profits received by crypto investors (top-10);
- number of blockchain developers (top-3).
PROSPECTS FOR THE CRYPTO BANK IN UKRAINE
Number of crypto owners in countries
In October 2021, the Verkhovna Rada of Ukraine considered the Law legalizing the market of digital assets in the country.
The document establishes the rules for market participants in the process of virtual assets turnover, as well as government regulations for this area.
The Ministry of Digital Transformation of Ukraine announced strategic plans to create favorable conditions in the country for the development of the crypto market.
The legalization of virtual assets creates favorable conditions for the implementation of large institutional projects. Transparent regulatory rules will encourage investment in this area.
In Ukraine, as in other many countries, the specialized legislation has not been directly elaborated for such entities as crypto banks, but the government policy of recent years and the position of the regulator indicates loyalty to the emergence of this kind of infrastructure. However, we are witnessing an increasing acceptance of digital assets as financial instrument. With the growing jurisdictions that have adopted legal regulations for digital assets turnover, the market for services in this sector will grow and require modern solutions.
Although our project originates from Ukraine, and we would like it to take place in our country, pending the adoption of regulation in the digital assets sector, we are also considering all the above-mentioned jurisdictions for start and further development.
The document establishes the rules for market participants in the process of virtual assets turnover, as well as government regulations for this area.
The Ministry of Digital Transformation of Ukraine announced strategic plans to create favorable conditions in the country for the development of the crypto market.
The legalization of virtual assets creates favorable conditions for the implementation of large institutional projects. Transparent regulatory rules will encourage investment in this area.
In Ukraine, as in other many countries, the specialized legislation has not been directly elaborated for such entities as crypto banks, but the government policy of recent years and the position of the regulator indicates loyalty to the emergence of this kind of infrastructure. However, we are witnessing an increasing acceptance of digital assets as financial instrument. With the growing jurisdictions that have adopted legal regulations for digital assets turnover, the market for services in this sector will grow and require modern solutions.
Although our project originates from Ukraine, and we would like it to take place in our country, pending the adoption of regulation in the digital assets sector, we are also considering all the above-mentioned jurisdictions for start and further development.
Recent years demonstrate reliable examples that the crypto market begins to be taken seriously by governments.
Many leading countries and international institutions are developing rules of engagement in this area. The emergence of legislative mechanisms suggests that, in fact, these relations not only exist but are beginning to take form.
In the future, it is inevitable to achieve common principles of regulation. All this will allow a new audience to enter this market, and the level of recognition and dissemination of blockchain technology will only grow.
Many leading countries and international institutions are developing rules of engagement in this area. The emergence of legislative mechanisms suggests that, in fact, these relations not only exist but are beginning to take form.
In the future, it is inevitable to achieve common principles of regulation. All this will allow a new audience to enter this market, and the level of recognition and dissemination of blockchain technology will only grow.
- In the current political situation, a full-scale Euro integration is expected for Ukraine. Of course, the financial and banking sectors will also be affected. These processes will take several years. Meanwhile, the project has time to form and integrate into the European financial system as a full-fledged subject of these relations.
WHY IS IT IMPORTANT TO START NOW?
Team
CEO, CO-FOUNDER
Blockchain product specialist. Joule Power ICO representative. PO and BA at blockchain solutions. Financial and Legal advisor. Head of Buy-Side in Standart NV Investment banking. Financial advisor and investment consultant. COO in IntroPro software.
Blockchain product specialist. Joule Power ICO representative. PO and BA at blockchain solutions. Financial and Legal advisor. Head of Buy-Side in Standart NV Investment banking. Financial advisor and investment consultant. COO in IntroPro software.
CO-FOUNDER, CSO
Strategy manager, system analyst in the public sector.
Strategy manager, system analyst in the public sector.
LEGAL ADVISOR, CO-FOUNDER
Fintech, Blockchain and Virtual Assets regulation specialist. Researcher. Counsel at Adcourt PhD in IT Law. Board of trustees Ziyo Forum Foundation.
Fintech, Blockchain and Virtual Assets regulation specialist. Researcher. Counsel at Adcourt PhD in IT Law. Board of trustees Ziyo Forum Foundation.
Artem Veselov
Abbasov Adian
Alex Yakovenko
Akbar Abdusalyamov
CMO
Co-founder and Head of сommunications of World Influencers Network.
Co-founder and Head of сommunications of World Influencers Network.
FINANCIAL MODEL
Project start
01.11.23
Calculation horizon
4
Start of the investment period
01.10.22
Start of sales
01.11.23
Rate of contributions to social funds
22.0%
Income tax rate
18.0%
Approximate VAT rate
20.0%
Deposit rate
5.00%
Banking fee
0.10%
Trading commission from deals
0.05%
Rate of income from the use of Custodial storage
1.00%
Commission for adding currency
0.05%
Service charge
25 USD
Average bank commission
40 USD
% Amortization of
IT equipment in a year
IT equipment in a year
22.0%
Project start
01.11.23
Calculation horizon
4
Start of the investment period
01.10.22
Start of sales
01.11.23
Rate of contributions to social funds
22.0%
Income tax rate
18.0%
Approximate VAT rate
20.0%
Deposit rate
5.00%
Banking fee
0.10%
Trading commission from deals
0.05%
Rate of income from the use of Custodial storage
1.00%
Commission for adding currency
0.05%
Service charge
25 USD
Average bank commission
40 USD
% Amortization of IT equipment in a year
22.0%
17.38%
[ ROI ]
[ IRR ]
$ 37 670 643
[ EBITDA ]
[ NPV ]
7,1%
$ 28 707 453
Capitalization at the end of the period at a market multiple of 10 for the last year of accounting
$ 186 839 941
934%
46
Growth of investments over the entire period of 4 years
Return on investment month
5.74%
[ PL ]
[ PP ]
3.90%
Estimated value of the investor's share
$ 46 709 985
At the moment, the development of the primary concept, market audit, and presentation materials have been prepared.
The structure of the project with the primary financial model was written, the technical task (TT) was compiled for the team of developers on the custom storage, as well as an early feasibility study and Project Market Fit. The blockchain core of the system has also been developed, where the issues of user account system, role access, account generation, transactions between them, and the primary design of the web version of the project with visualization of a part of the functionality have been solved.
The pre-Seed stage of financing is completed at the expense of the founders.
Currently, work is underway to attract investment for the next - Seed round, which involves the development of a full set of financial, technical, and legal documentation to launch the project (terms of 6-9 months).
The list of documentation includes the preparation of a complete TT of the entire project, a business plan with a financial model, taking into account the cost and revenue for the entire functionality of the project, and a marketing plan for the development of Lockton Bank and MVP of the software platform.
Also, at this stage, it is planned following:
a) obtaining a license for crypto turnover as a financial institution;
b) obtaining a license for crypto asset management;
c) other costs related to licensing and legal compilation of the selected starting jurisdiction.
The preliminary amount of funds to be raised is USD 750,000 by selling 5% of the project shares.
The following steps will follow:
Round "A"
The formation of the product, which includes the construction of the software and hardware complex (specialized equipment: tier-1 data center and software), the launch of the crypto bank as a functioning business structure (the implementation of 1.5 - 2 years), as well as preparation for the organization of its own fundraising model. The amount of investment attracted is from $ 5,000,000 by selling up to 20% of the project share.
Round "B"
Growth and expansion of the project in the market, expansion of partner network and services, and realization of marketing strategy. Attracting funding to the project through INFTO - Initial NFT Offering. Company’s "tokenized share" can be publicly implemented with NFT technology in compliance with all KYC/AML rules, marking and personalization of the asset, which meets all expectations of modern venture financing”
PROJECT FINANCE
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Ukraine, Kyiv
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