Currency stocks? RWA？ If trading cryptocurrency to stocks! (1) In recent days, while recovering from illness at home, I have spent a lot of time trying to improve the compliance of BTC to IBIT trading pairs. Unfortunately, despite hiring a large number of compliance personnel and intermediary methods, it is impossible to fully comply with the regulations of BTC to IBIT trading pairs for all audiences. If it is only for professional investors, there are still ways to do so. However, for retail users, the laws in the United States, Singapore, and Hong Kong currently do not have a solution. Only Germany and Switzerland are allowed, but only for users in these two places. But this doesn't stop me from discussing my ideas. Currently, there are two commonly used stock coin issuance schemes: The first and most commonly used method is based on the Feeder Fund, which is to establish a fund and use the funds injected into the fund to purchase a certain stock or ETF. For example, I used IBIT as an example, and then used this fund to apply for an ETF or public fund. So when users purchase my ETF or fund, it is equivalent to buying IBIT. At this stage, it is possible to operate in compliance. If operating in Hong Kong, license 1 (fund distribution) and license 9 (fund management) are required. In Singapore, RFMC (professional investors) and/or LFMC (retail users) are required. In Switzerland, it is necessary to comply with the FINMA framework and pass DLT and STO laws. In Germany, it is necessary to comply with the BaFin framework and pass the Central Securities Depository or BaFin approved registration platform. The United States is not the case. However, in the future coin issuance process, although it can also be carried out, apart from Switzerland and Germany, there is no compliant solution in the United States, Singapore, or Hong Kong that can sell to the public (retail users). Tokenization ≠ regulatory exemption, and it is still a security share. If it is forcibly sold to professional users, it can only be in the whitelist system, such as ERC-1400/ERC-1404/CMTAT. The second method is the tokenized ETF approach, which is more complex and has very strong compliance requirements. BlackRock's BUIDL adopts this approach. Let me put it in a simpler way: A. Establishing legal entities in trusted or internationally fund friendly jurisdictions (such as BVI) with the aim of providing a legal identity and investor agreement structure. B. Clarify investor qualifications, only open to qualified and/or professional investors, and avoid retail legal complexity with high thresholds. C. The assets under management are all traditional low-risk capital instruments (treasury bond, cash, repurchase agreements) to ensure the security of principal+liquidity. D. Digitize fund shares into tokens, but all issuance and/or redemption and/or transfer agents, custodians, whitelists remain the responsibility of traditional financial institutions or regulated entities. E. Providing on chain visibility, DeFi liquidity, and stable value commitments that meet traditional regulatory requirements and are accepted by the cryptocurrency market and/or institutions. So compared to the two options, the first one is simpler. If we adopt a partially compliant approach, the first one can be pushed forward. Let me briefly describe the practical application of the first option, using IBIT as an example: 1. Architecture logic: A. Reserve assets: The fund account holds real IBIT (e.g. 10000 shares of IBIT). B. On chain Token (tIBIT): Directly issue 10000 tokens (1 token=1 share of IBIT) through 1:1 mapping. C. Free transfer: The contract is standard ERC-20, without whitelist, and anyone can transfer and trade. D. Redemption mechanism: Users who burn tIBIT can exchange it back for IBIT or equivalent USDC/BTC at a 1:1 ratio. 2. Subscription/Redemption Process: Subscription: Users pay for cryptocurrencies such as BTC/USDC, and the fund uses the funds to buy IBIT and then mint an equal amount of tIBIT into the user's wallet. Redemption: The user sends tIBIT to the contract, which triggers a burn (destruction), and then the fund releases IBIT or equivalent USDC/BTC to the user. 3. Price anchoring: A. INAV Oracle: The contract references IBIT iNAV (updated every 15 seconds) to ensure on chain price reference. B. Arbitrage mechanism: If tIBIT>IBIT: Arbitrageurs subscribe for new IBIT → mint tIBIT → sell for profit. If tIBIT<IBIT: Arbitrageurs buy cheap tIBIT → redeem IBIT → sell IBIT for profit. By subscribing and redeeming with iNAV Oracle, the price of tIBIT will naturally converge to IBIT. Example, assuming: The fund holds $1000000, buys 10000 shares of IBIT (at $100 per share), and issues 10000 tIBITs. When tIBIT rises to $105 in the market: Arbitrageurs pay $100 to subscribe for 1 share of IBIT, mint 1 tIBIT, sell for $105 at a profit, and when the price is pushed back to $100. When tIBIT falls to $95 in the market: Arbitrageurs buy 1 tIBIT ($95), redeem 1 IBIT (worth $100), profit $5, and the price is pulled back to $100. The general design is as follows: interested friends can communicate and chat. In fact, there is still a lot of content to write about. We are about to leave, so let's write about it here. This article is sponsored by Bitget | @ Bitgetzh