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I. Introduction
Money wants to be free, and the Chynge vision of payments is IFS: instant, free, and safe. Payments that are instant and free rest on blockchain and crypto. Chynge shall utilize a combination of three items, namely utility tokens, stable coins, and the Stellar blockchain to digitize cross-border payments.
Chynge Central, the flagship Chynge solution, utilizes blockchain to track transactions for the delivery of money from the Sender to the Recipient to ensure data integrity and transaction security at high speed and low costs.
The Chynge blockchain is configured as a private, decentralized protocol to preserve customer and data privacy, and to maintain the immutability of the recording of the sub-transactions of a cross-border payment including the last mile delivery for financial inclusion of the unbanked and underbanked customers.
The Chynge blockchain is based on the Stellar protocol which is optimized for cross-border payments. In addition, the Stellar protocol is the only blockchain that is Shariah compliant as certified by the Shariah Review Board (SRB) of Bahrain. This allows Chynge to differentiate and offer Islamic financial services in Muslim countries.
II. Payments on Blockchain as Envisioned by Chynge
The steps for cross-border payments on blockchain:
Step 1: Sender sends money to Chynge;
Step 2: Chynge consolidates remittance orders by destination country, buys foreign exchange at wholesale rates from Banks;
Step 3: Chynge sends money via Bank Rails to Bank or Agent Partner in the receiving country; and
Step 4: Chynge or Partner sends money to Recipient and delivers via Bank Account, Mobile Wallet, or Cash Pick-up at Agent.
Each of the four (4) steps as described above shall be written to the Stellar blockchain.
III. Digital Money for Digital Payments
The use of digital money solves the inherent problems in cross-border payments including high costs and speed of delivery.
The steps for cross-border payments with digital money:
Step 1: Sender sends money to Chynge;
Steps 2 and 3: In the Chynge Clearing Center (C³, say c-cube), convert the send currency to stable coin and then re-convert the stable coin to the receiving currency (details follow below);
Step 4: Chynge or Partner sends money to Recipient and delivers via Bank Account, Mobile Wallet, or Cash Pick-up at Agent in support of financial inclusion.
Likewise, each of the four (4) steps as described above shall be written to the Stellar blockchain.
IV. Chynge Clearing Center (C³)
The Chynge Clearing Center is the fundamental piece in the overall digital payments process. Without C³, payments must remain on traditional rails based on traditional fiat currency that comes with the heavy baggage of traditional payments including high service fees, exorbitant foreign currency charges, and slow processing times.
The Chynge Clearing Center serves as an efficient hub to exchange Chynge Coins. However, the supply and demand for the various Chynge Coins for direct exchanges may not be perfectly matched — for example, there may not be sufficient matches for Singapore Dollar Coins and Indonesian Rupiah Coins, and the use of the Chynge Token (CLPX) as an intermediary medium of exchange smoothens the demands for the exchange of all Chynge Coins. Thus, all the Chynge Coins convert to CLPX and then the CLPX convert to the designated Chynge Coins. The Chynge Clearing Center shall reside in ChyngeX.io, a private company incorporated in Singapore, that serves as a decentralized digital assets exchange dedicated to Chynge digital assets such as Chynge Coins and Chynge Tokens.
Although the Chynge Clearing Center will exchange Chynge Coins and the Chynge Token CLPX for a start, the Chynge Clearing Center may be easily extended to support all digital assets including Bitcoin, Ethereum, alt-coins, security tokens, and others.
The Chynge Token CLPX is a utility token to perform a cross-border payment transaction, and serves as a medium of exchange between two Chynge Coins. The price of a CLPX may fluctuate based on supply-and-demand or market sentiment.
The Chynge Coins are stable coins and by definition, their prices do not fluctuate. Each Chynge Coin shall be pegged to a corresponding currency and that value shall remain at the unit value of that currency. For example, a USD Chynge Coin shall always be priced at USD 1.00.
V. Chynge Coins in a Closed Loop Ecosystem
Chynge Coins can exchange only and only with the Chynge Token CLPX. Chynge Coins cannot exchange directly with other Chynge Coins. Chynge Coins cannot exchange directly with other digital assets including but not limited to cryptocurrencies such as Bitcoin and Ethereum, alt-coins, stable coins, and security-backed tokens.
The Chynge Coins only exist in C³ which is a closed loop Chynge ecosystem that allow the Chynge Coins to exchange only with Chynge Token CLPX.
The Chynge Coins shall not be legal tender.
VI. Financial Services Industry (FSI) Best Practices for Trust, Safety and Security
The main trust issue with Chynge Coins is that the Chynge Community must believe that each Chynge Coin is backed by at least the equivalent value in fiat currency. Without such a financial backing and hence, an underlying trust, there may be a run on the Exchange where a flood of Chynge Coin holders abruptly exchange their Chynge Coins back to currency.
To instill trust in the Chynge Community, there shall be three (3) main Stellar wallets for open and public verification by the Chynge Community:
Issuer Wallet
This wallet issues all the Chynge Coins and Chynge Tokens CLPX in the universe, and this wallet is then locked so that no new Chynge Coins or Chynge Tokens CLPX can be issued.
Distribution Wallet
This wallet receives all the Chynge Coins from the Issuer Wallet. A small portion of the Chynge Coins from the Distribution Wallet is sent to the Transaction Wallet. The Distribution Wallet acts as a storage safe of the Chynge Coins that are not in general circulation.
Transaction Wallet
This is a transactional wallet to directly transact with the Chynge Community and distribute Chynge Coins to buyers of Chynge Coins, and to also receive Chynge Coins when the Chynge Community redeems their Chynge Coins.
Bank Account
Chynge shall dedicate bank accounts to manage the various currencies from the Chynge Community upon the distribution of Chynge Coins to the Chynge Community. These bank accounts shall be segregated from the operational bank accounts of Chynge so that there is no co-mingling of funds from the Chynge Coins and the funds earmarked for the business operations of Chynge.
To ensure that the Chynge Coins are backed by currency, the Chynge Balance Test (CBT) must hold true:
Issuer Wallet = Distribution Wallet + Transaction Wallet + Bank Account
The Chynge Community may at any time scan the Issuer Wallet, Distribution Wallet and Transaction Wallet via their respective Stellar addresses, in order to verify the contents of the wallets.
The auditors for Chynge shall audit the Bank Accounts and publish the audited monthly balances of the Bank Accounts for the Chynge Community to view.
The trust for the Chynge Coins by the Chynge Community shall be reinforced when the Chynge Community reconciles the balances of the Wallets and the Bank Accounts, and then apply the Chynge Balance Test (CBT).
The audited monthly balances of the Bank Accounts shall be published when at least one of the currencies reaches a threshold of the equivalent of USD 5M (United States Dollars Five Million only) or all the currencies reaches a cumulative threshold of the equivalent of USD 20M (United States Dollars Twenty Million only). The audits shall be performed and certified by a public accountant registered in Singapore that is part of a global network of auditors.
In addition to the CBT, the governance of the Chynge Wallets and Bank Accounts are instrumental for the overall trust and accountability of the Chynge Coins. The Chynge Wallets shall each be configured for multiple signatures with at least four (4) signatories. The multiple signatories allow redundancy and failover in the event that a signatory is unavailable due to absence, health or death.
When adding or removing signatories to the Chynge Wallets, a minimum of three (3) signatories are required.
When moving Chynge Coins from the Distribution Wallet to the Transaction Wallet, a minimum of two (2) signatories are required. Chynge Coins shall not be moved from the Distribution Wallet to the Issuer Wallet or moved directly to the wallets of the Chynge Community.
When moving Chynge Coins from the Transaction Wallet to the wallets of the Chynge Community or from the Transaction Wallet to the Distribution Wallet, any one (1) of the signatories shall suffice.
Similarly, there will be governance in the management of funds in the Bank Accounts that hold funds that reconcile with the Chynge Wallets. This governance includes multiple signatories before debits are made from these Bank Accounts.
As required by Stellar wallets, a trustline is to be established for each Chynge Coin to be supported in the holder’s wallet.
VII. Portfolio of Chynge Coins
The portfolio of Chynge Coins shall include the 160 global currencies, three (3) precious metals, and two (2) Islamic coins. The list of the Chynge Coins can be found here.
VIII. Business Model
The business model of the Chynge Coin is based on a Service Fee that is payable when converting between the Chynge Coin and currency. The Service Fee shall vary based on the available liquidity, export controls imposed on the currency by the local regulators, and overall demand for that currency or corresponding Chynge Coin by the Chynge Community.
The introduction of the Chynge Coins to the existing Chynge Token CLPX and Chynge token economy would upgrade the system from merely being a sum of assets or utility, to include a medium of exchange.
IX. Regulatory Compliance
A robust financial security policy shall be in place to support cross-border digital payments that are safe from financial crimes.
Customer due diligence (CDD) shall be performed on customers who conduct money transfer transactions with Chynge with particular attention on money laundering, terrorism financing, fraud, vice, tax evasion, corruption, drugs, trafficking, and arms.
Know-Your-Customer (KYC) shall be conducted at various levels such as Simplified CDD, Standard CDD, and Enhanced CDD based on the risk level of the customer, and shall include screening against sanction lists.
Recipients of funds shall be subjected to Know-Your-Beneficiary (KYB) including sanction screening.
Source of Funds and Use of Funds shall include documentary support from the Customer or the Beneficiary.
Chain analysis, if any, for Source of Funds and Use of Funds is easily documented because the blockchain transactions of Chynge digital payments comprising Chynge Coins and Chynge Token CPLX can only be performed and recorded in the Chynge Clearing Center (C³) closed-loop ecosystem.
X. Disclaimer
This post was authored by Joe Tusin in his personal capacity. The analysis and opinions expressed in this article are the author’s own, reflect his understanding of the current state of the markets and technology.
This article is neither endorsed by Chynge Singapore Pte. Ltd. (Company Registration No. 201509072Z) nor contains any legal offers, representations, commitments or solicitations to the general public.
