Escrow Swap Settlement Network for Compliant Cross-Border Token Trades
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Solution Overview
Problem
Regulatory challenges and compliance issues faced by cryptocurrency trading platforms due to tokens being deemed securities, leading to operational impracticality, revenue loss, or legal risks, as they must navigate complex and costly registration processes in multiple jurisdictions.
Innovation Solution
A decentralized global liquidity and settlement system (GLASS) that enables compliant cross-border token trades by integrating licensed entities as settlement providers and trade referrers, using smart contracts and GLASS tokens to facilitate secure and regulatory-compliant transactions.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Reliability
If trading platforms register as broker-dealer in each country to facilitate security token trading, then regulatory compliance is improved, but operational complexity and costs increase significantly
Solution Approach 1:
The patent introduces a decentralized settlement network as an intermediary layer between trading platforms and regulatory requirements. Licensed entities in each jurisdiction act as intermediaries to handle compliance, while the decentralized network provides the settlement infrastructure. This allows platforms to comply with regulations without directly operating as broker-dealers in every jurisdiction, reducing operational complexity.
Solution Approach 2:
The system segments the compliance burden by separating trading operations from settlement operations. Trading platforms focus on facilitating trades, while licensed entities in each jurisdiction handle the compliance and settlement aspects. This segmentation allows platforms to serve multiple jurisdictions without needing to register as broker-dealer in each one.
2Ease of operation
If trading platforms choose not to register in jurisdictions where tokens are deemed securities, then operational simplicity is maintained, but legal risks and enforcement actions increase
Solution Approach 1:
Licensed entities in each jurisdiction serve as intermediaries that absorb the legal risks. These entities are authorized to handle security token transactions in their respective jurisdictions, protecting unregistered platforms from enforcement actions while maintaining the platforms' ability to operate simply.
Solution Approach 2:
The system allows platforms to self-serve by providing a decentralized settlement network that automatically handles compliance requirements. Platforms can facilitate trades without actively managing regulatory compliance in each jurisdiction, as the network and licensed entities handle these functions autonomously.
3Object-affected harmful factors
If trading platforms cease enabling trading in countries where tokens are deemed securities, then legal risks are eliminated, but revenue loss occurs
Solution Approach 1:
The decentralized settlement network provides universal access across multiple jurisdictions simultaneously. Licensed entities in each country can facilitate trades locally while all participants access the same unified platform, allowing platforms to maintain revenue-generating operations in previously restricted jurisdictions without assuming legal risk.
Solution Approach 2:
Licensed entities act as intermediaries that enable trading in restricted jurisdictions without exposing the main platform to legal risk. These intermediaries handle the compliance and regulatory requirements locally, allowing the platform to continue operating and generating revenue globally.
4Adaptability or versatility
If existing trading platforms operate without licenses in multiple jurisdictions, then operational flexibility is maintained, but they become targets of regulatory enforcement
Solution Approach 1:
The system segments operational flexibility from regulatory compliance. Trading platforms maintain the flexibility to operate across multiple jurisdictions by using a decentralized architecture, while licensed entities in each jurisdiction assume compliance responsibilities. This segmentation allows platforms to be versatile without being direct targets of enforcement.
Solution Approach 2:
Licensed entities serve as intermediaries that protect platforms from regulatory enforcement. These intermediaries are the entities that regulators would target, not the decentralized platforms. The intermediaries absorb the compliance burden and regulatory scrutiny, allowing platforms to maintain operational flexibility.
Data Source
AI summary
A computer-implemented method for performing a digital currency escrow swap on a network of nodes is disclosed. The method includes placing transfer orders through an intermediate node and sending signed transfer order transactions with digital wallets to an escrow swap node. The method further includes performing a transfer-in order finishing operation by requesting a transfer of digital currency to the escrow swap node and receiving the digital currency via the transfer-in node. For each sell order, digital securities are transferred to the escrow swap node via the transfer-out node. The digital securities are sent from the escrow swap node. For each transfer-out order, the digital currency is sent to the transfer-out node. The method includes an analogous operation to finish a transfer-out order.