2.4 What's the solution?
On-chain synthetic CDOs
ChinaAI introduces a tokenized synthetic CDO to address the root cause behind USD illiquidity within BRICS: capital charges that traps surplus cash within bank as a means of credit risk protection. In turn, $BRICS transfers that risk to token investors: providing compliant credit risk mitigation for banks and profitable governance tokens for investors.
Key benefits:
For originating banks: $BRICS provides credit risk protection, unlocking regulatory capital through a $500 million sovereign guarantee, ensuring compliance with Basel III/IV regulations.
For investors: $BRICS enables arbitrage of excessive BIS capital charges via a compliant 2-swap structure. This enables a fundamentals-driven cash flow for investors while simultaneously granting censorship-resistant governance rights on-chain. Section 2.1 illustrates the minimum viable structure.
Fair and Public Token Launch:
A cornerstone of ChinaAI’s governance model is the fair and public launch of the $BRICS token. Unlike traditional solutions, no pre-allocations are made to insiders (Venture Capital, partner banks, or Private Equity) ex-ante. This approach ensures equitable distribution of governance rights and compliance with banking regulations, which prohibit concentrated equity control by banks and core institutional players.
Why Fair Launch Matters:
The fair launch mechanism ensures:
Censorship-Resistant Governance: Governance remains decentralized, allowing equal opportunity for participation from banks, retail token holders, and other stakeholders.
Public Participation: Members of the public can actively engage in governance and benefit financially from the arbitrage opportunities enabled by $BRICS. This is in keeping with the public mandate of the Financial Cooperative Institution.
Transparency and Trustlessness: The on-chain design ensures trustless execution and prevents conflicts of interest prevalent in traditional financial systems.
Compliance: By offering fair distribution of governance rights, ChinaAI ensures adherence to Basel-compliant governance frameworks, enabling scalable adoption by parties that have been severely curtailed otherwise, banks and underwriters.
The "fair launch" mechanic is elaborated in Section 3.3.
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