What are Safe Tokens?
Safe Tokens are ERC20 wrapper tokens with built-in KYC checks. Any underlying ERC20 token can wrapped and thus virtually extended with this new functionality. Checks are performed on every transfer, and if both parties do not pass KYC, the transaction fails.
How do I trade Safe Tokens?
You must first onboard KYC (i.e., obtain a non-transferrable NFT), then wrap your tokens into Safe Tokens, then you can trade Safe Tokens.
How do Safe Tokens check KYC?
When a user initializes a transaction, the Safe Token contract first scans the sender and receiver's wallet for a KYC credential (i.e., non-transferrable NFT). If both parties have valid KYC credentials, then the transfer() function executes and the Safe Tokens are transferred. This way the checks happen in real-time and on the smart contract level.
What if I am no longer compliant but hold Safe Tokens?
Your Safe Tokens will be frozen. You always have the option to unwrap your Safe Tokens into the underlying tokens as this does not require a KYC check.
Your Safe Tokens are frozen because any trade in a Safe Token will trigger a KYC check, which fails because you do not have a KYC credential. You always have the option to unwrap your Safe Tokens into the underlying tokens as this does not require a KYC check.
What other checks can Safe Tokens perform?
Safe Tokens are capable of checking: KYC, KYB, AML, Accredited Investor, Jurisdiction.
Why do you need a wrapped token?
The wrapper token (i.e., DAI.safe) adds the compliance-related code to the underlying token (i.e., DAI). This way, when there is a trade in the wrapper token there is also a KYC (or KYB, Accredited Investor, etc) check happening. Without the wrapper, there would be no way to check for KYC on transfers as the underlying token standards do not incorporate this logic.
The beauty of the wrapper implementation is that the value associated with the the underlying token can be "carried through" and recognized when trading the wrapper token (i.e., DAI.safe). This allows users to trade the underlying asset's value (since the wrapper token is always 1:1 redeemable) in a compliant manner (since the wrapper token contains compliance functionality).
What happens if someone that is not KYC trades Safe Tokens?
This is technically impossible because the KYC check is built into the transfer() function of the Safe Token contract. This means the KYC check and the movement of funds happen in 1 transaction. One cannot happen without the other, making it impossible to trade Safe Tokens without first passing the KYC check as the movement of funds is contingent on the KYC check.
How do I begin trading with KYC/AML?
- Mint BlueID --> 2) Wrap tokens --> 3) Trade
For more information, please click here.
Is there a fee to trade Safe Tokens?
There is no fee to wrap Safe Tokens or trade Safe Tokens.
What happens if you trade a safe token with a counterparty that is not compliant?
Safe Token transfers only execute if both the sender and receiver pass a compliance check in real-time. If both parties do not pass, the trade will fail and the state of the chain reverts. If a user holds Safe Tokens and then becomes non-compliant, the assets will be frozen and their only option is to unwrap.
Is the KYC check only when I wrap?
No, there is a KYC check on every transfer of Safe Tokens. This ensures there is no risk between the time of the check and the actual movement of funds (since they happen in the same transaction).
What extra steps are needed to trade Safe Tokens?
Safe Tokens behave like ERC20 tokens, which means no additional steps are necessary. The checks of the sender and receiver's wallet takes place in the background as everything occurs at the smart contract level.
What is a KYC credential?
Credentials represent compliance attributes (i.e., KYC) of users and are used to verify the identity and compliance of users during Safe Token transactions.
Credentials can come in various forms (i.e., non-transferrable NFTs, verifiable credentials, etc) and are cryptographically tied to DIDs ("Decentralized Identifiers") stored on-chain. Compliance providers issue credentials and are responsible for maintaining the credentials of their users (i.e., revoking a credential). Below are the supported credentials for Safe Tokens.
Which blockchain are Safe Tokens on?
Safe Tokens will initially be on Ethereum and zkSync.
Why do I have to Wrap?
Wrapping your tokens into Safe Tokens attaches the compliance functionality to the token contract. This ensures that any transfers of Safe Tokens trigger a compliance check on both parties before executing.
Can I unwrap my Safe Tokens?
Yes, unwrapping Safe Tokens follows the same process as wrapping, except there is no compliance check on the user. This ensures that users can always redeem the underlying value of their Safe Tokens.