Monetari at $0TVL Hour: Tokenizing Turkish Eurobonds for Onchain Yield

Hello everyone. So yeah, my presentation will be much easier. So let's talk some RWAs. I am Karan from Monetary and I'm the co-founder and CEO. So we are an end-to-end tokenization infrastructure for financial institutions in emerging markets that has lots of traction over the last year.

But today I will be talking about our Turkish Eurobond tokenization project which is returning 2X stable returns and DeFi composable with government-issued debt notes. So at this point of RWA real-world yields, we see that most of the DeFi liquidity providers on-chain treasuries are stuck with US Treasury bills which is around at maximum 4 to 5%. However, in real life most of the liquidity is starting to pivot towards emerging markets which has the juiciest yields, obviously. But we are not yet leveraging the blockchain benefits to bring these global financial products in global distribution. Right now there is only 1.

3 billion non-US government bonds which are mainly European government bonds that has even less yield than US Treasury bill. So at this point as Monetary, our solution is tokenizing Turkish Eurobonds. Right now there are 36 Eurobonds that are issued by Turkish government in European and US markets that has maturity of around 5 to 7 years. It floats around 5 to 11% depending on the bond. So we are working with an investment bank which is also our We are actually a subsidiary of that investment bank.

They are already running some funds to their sovereign clients. We will just basically tokenize their strategy. We are adding a 300 to 500 bps premium over treasury bills. These are government issued debt notes. No DeFi algorithms or anything.

Our structure, which I will deep dive next slide, is institutional grade Finma custody with Clearstream and security agent. So, how our operation works is this. We have a Cayman Foundation, which has no beneficial owner. This Cayman Foundation will issue a debt note that will be bought by our Next Month SPC. This Next Month SPC will be the SPC that the investors will be investing in, and this SPC will buy the debt note.

Eventually, we will be working with InCore Bank as a broker. There were other options, but we believe it is the best way to go in European market rather than US market. InCore Bank will have a segregated Eurobond custody account under Clearstream, and we will also work with the security agents in terms of collateralization. The tokenization regulation will be under Swiss law, and will be under our battle-tested smart contracts. So, how it works is very simple straight.

You deposit USDC, you mint the tokens, which represent fractional shares of SPVs that we go and buy Eurobonds for you. So, at this point, the important notice is how do we manage the collateral for you to maintain the dual finality. So, after your post subscription, we give the order to our broker. He settles it right away, even though the bonds come at T2, but you already lock your cash and trade claim. After post settlement, the Eurobonds stay at Clearstream, which the whole world works with, and we use buffers to provide your redemption, which is not only sitting on idle cash, but also overnight repos that we can easily redeem in the daytime.

So, how about our bankruptcy remoteness? If we go bankrupt, it doesn't mean anything. We don't have any beneficial ownership with the foundation. As I said, it doesn't have any ownership. What happens if InCore Bank goes bankrupt?

It doesn't mean anything because they only have a segregated account under Clearstream, but the real custodian is Clearstream, not InCore Bank. What happens if SPV defaults? We are working with an S security agent, which will lower the yield, but cover the collateralization, which most of the European private credit funds are already working with, and is a battle-tested option for collateralization in real-world assets. So, what is the yield source really? It is a coupon income.

These Turkish Eurobonds are semi-annual coupons. Our fund will go around 7%. There will be accrued interest daily from NAV from our fund managers. So, there is some price movements variabilities because of risk assumptions, which is sovereign credit. Right now, for the past 1 year, Turkish credit risk has been increasing, but it is not always been the same case.

It can fluctuate. Also, we can have struggling with liquidity buffer depletion. We can be on the wrong side on the wrong day, like Iran war or Israel war, that we can maybe go and stop redemptions for 1 day. Our smart contracts are battle-tested. I will go into that.

And in terms of counterparties, our counterparties are really solid traditional finance brokers and custodians. So, in terms of our regulatory pathways, we will go with phase one fast launch with Swiss FinSA exempt. It will be qualified investors, no prospectus, and minimum ticket size around 100k. Then we will go and try to get the EA passport with Liechtenstein prospectus in the help with our investment bank. So, our phase two is obviously go into this permission lending looping strategies or even like Centrifuge wrapping this token into a more DeFi compatible utility token.

But for now, it will be whitelist only. In terms of competitive landscape, this is no arbitrage, this is no crypto strategy. This is real-life government bond yield that is 2x the treasury bill. And as I said, plain and simple, we are giving you 2x T-bill yield. We are your local provider that US or European brokers that don't have the know-how, don't have the network, and don't have the brokerage to provide you this emerging market real-world yield.

So, our road map is that we are right now Actually, I don't have much time. We are working with Terra Bank. We are doing their licensed custody service, and we are also working with KoinTra to give them our gold tokenization project. After these two projects finishes at the Q2, by the way, the gold tokenization ICO will be starting around 10 kilobars, which is also huge. We will go straight dive into the Eurobond project.

We are also working with Visa in Turkey to Eastern European corridor for a deposit token for Turkish banks. We are working with a core banking partner Fimple in that project as well. And in terms of KYC AML, we have embedded Osprey's solution into our tokenization infrastructure. So, thank you for listening, and happy to answer your questions. Okay, thank you.

I want to ask about business model. I got maybe a bit lost in the beginning. Uh So, you are infra provider, right? But So, you can white label or others can white label, but this Turkish bonds is something you do yourself, or not? Yeah, we will be doing the tokenization issuance from our platform, but we will be working with a brokerage, but eventually the issuance will be on our platform.

So, we will get the fees. Okay, but for the Turkish one, it's like part of your business model, or not? What do you mean by the Turkish ones? The the The one you just described. In the in the presentation, like the Turkish Eurobonds structure.

Yeah. Uh that's done by some client of yours, or it's No, no, no. The Tera Bank is our holding company. Ah, okay.

an investment bank. They already run uh these Eurobond funds to their sovereign clients. We are just providing them a new distribution channel in DeFi. Ah, okay. Okay.

So, you are the infrastructure provider. Yep.

Okay. So, to just to clarify that, so the Turkish government is issuing a Eurobond, and you're tokenizing that and putting that on the blockchain.

Yep. Okay. These are dollar denominated uh sovereign issued government bonds around 5 to 7 years maturity. There are 36 of them right now in European and US markets. They are in average issuing four in every year, but it's fluctuates.

Did you write your own smart contracts, or are you using some uh existing solution? You know, we wrote our own smart contract in gold and in this project for our gold tokenization project, we already have a audit from uh Hacken. And we're also talking with Halborn guys to have an additional audit. Maybe we will go into double audit in the Eurobond tokenization as well. On which chains are you deployed?

Uh right now for gold, uh Ethereum and Stellar, but we are talking with other RWA chains as well. And for the deposit token work with Visa, we are working on Canton, but it is not for the Eurobond, obviously. How interoperable is the token with DeFi given KYC requirements? Yeah, it is not with the permissionless ones. It will be only open to permissioned lending markets like Horizon.

Or another solution is to wrap the token like Centrifuge to give composability, but it is not our phase one problem. We are just looking to provide the tokenization and work with LPs to give it at start and see what we can do with that.