Stablecoins as the future of payments.
The stablecoin market cap is currently approx $124.8bn with Tether and Circle representing ~85% of the market. Much of the existing use case is focused around crypto trading pairs, borrowing and lending.
A key emerging use case for stablecoins lies in B2C- remittances in emerging economies as stablecoins act as a store of value / inflation hedge, one of BTC’s original use cases. In addition, a B2B commercial cross border payments and treasury management use case is also starting to emerge where stablecoins are used in global commerce to conduct business.
As regulations increasingly cover digital assets, many of the existing solutions in crypto, which includes: exchanges, on/off ramps (including OTC desks and incumbent stablecoin issuers) may not have the capacity to onboard businesses and comply with regulation with limited volumes. Existing fiat solutions also fall short in areas like leverage, settlement timing and counterparty risk.
We believe stablecoins will likely enhance current payment solutions for companies transacting across borders. As companies navigate the complexity of using stablecoins and fiat for various transactions, treasury management solutions that can support both methods of payment will be most optimal.
-Founded in October 2022 with pre -seed funding from VC’s, GSR, Aquanow, Blockchain founders fund, Saison capital, Sparkle VC.
-2023 June fully functional MPC wallet infrastructure and onboarding B2B clients.
-2023 Sept payment infrastructure executing merchant pay-ins and pay-outs settled in Stablecoins.
A purpose-built subnet designed to facilitate seamless, efficient, and low-risk payments at scale in emerging markets.
Klear connects merchants to local payment and liquidity providers- P2P, OTC, institutional participants, in emerging markets.
The network improves the payment experience by enabling real-time global cross-border payments.
Klear adopts a Proof-of-Stake consensus mechanism, utilizing the native token $KLEAR.
Revenue is generated through network fees. These proceeds are used to compensate token holders of $stKLEAR, the staked KLEAR token. Stakers receive a percentage of all payment volumes conducted through the ecosystem.
The existing solutions are dominated by local crypto exchanges, existing fiat solutions and P2P providers.
Local exchanges in different markets act as facilitators of cross border transactions by accepting local currency and swapping into stablecoins like USDC and USDT but do not provide an end to end solution.
Existing fiat merchant solutions include Dlocal, which allows fiat pay-ins and pay-outs. Payoneer is another one which provides local payment collection to freelancers and SMBs that provide online services to ecommerce.
P2P solutions like Binance enable P2P currency exchange transactions with local currencies.
Local crypto exchanges tend to work as follows:
However, the solutions are insufficient for various reasons, as explained below.
There are three significant issues with the above approaches:
DLocal and other merchant solutions are not real-time in the settlement of merchants. There is considerable delay from when customer funds are paid, and when the merchant receives and is able to access the fiat. Sometimes this delay can be T+5 or T+7 days. They also don’t service B2B, only C2B and B2C payments are facilitated. Payoneer also operates on a T+3 settlement basis.
Existing solutions like Binance P2P and Exchanges lack efficient mechanisms for Merchant processing of payments. Pay-ins and pay-outs are not facilitated.
The current architecture for cross-border via exchanges introduces several inefficiencies:
These inefficiencies hinder payment settlement times, increase costs, and create operational complexities.
Exchanges operate an omnibus system where user funds are held in co-mingled wallets. For companies making payments, having funds sitting in omnibus accounts adds a layer of risk compared to traditional banking payment methods.
Klear’s vision is to revolutionize the payment ecosystem within the digital asset sphere through the implementation of a permissioned L2 network. Our regulatory compliant network will act as a trusted intermediary, ensuring seamless and efficient payment facilitation. We are reimagining new frameworks that retain the utility of traditional payment systems and using a native currency called Klear token to attract and incentivise network participants and guide behavior.
A large number of countries won’t allow banks and traditional financial institutions to service crypto companies, but these countries haven’t made crypto illegal. This means that the only way to service on/off ramps in these markets is through alternative payment methods.
Currently, most emerging markets are heavily reliant on local exchanges or P2P. However, P2P wasn’t built for merchant payment processing or B2B order flows. It lacks the scalability and operational efficiency required to service merchant payments.
By introducing a Permissioned network of local liquidity providers, we can create a secure, trustworthy, and compliant network of sophisticated counterparties who act as on/off-ramp methods for emerging markets. This would enable access to liquidity from new participants and create an efficient market for stablecoins.
What are the advantages of this method:
Krayon’s network will power global cross-border commerce for the next generation of entrepreneurs, giving every merchant instant access to global money.
Krayon’s L2 provides a Premissioned network for clearing and settlement of payments using stablecoins. The network acts as a smart order routing system matching Krayon’s customer order flow with liquidity providers for different fiat<>stablecoin pairs and automating settlement between the counterparties.
KLEAR will operate as a permissioned network initially, where participants will have to go through KYC and KYB processes in order to be a liquidity provider or Krayon client. In time this potentially moves to on-chain KYC methods as the network becomes more decentralized.
Once KYB is complete, liquidity providers can choose which currency pairs and payment methods they wish to support. They provide a bid and ask for these pairs and post USDT as collateral which is held in a Krayon MPC wallet which is controlled by the protocol for automated settlement of order flow.
Collateral can be withdrawn at any time by the liquidity provider, provided that they have no active orders. The liquidity provider must provide local payment details which is sent to the merchant. The liquidity provider will then receive fiat payments using their local payment method from the merchant in exchange for stablecoins.
Order flow from merchants or other businesses that have demand for fiat<>stablecoin liquidity in exotic pairs.
Merchants can choose which payment methods they wish to adopt. When they generate an order for USDT, they submit this order to Krayon’s L2, which then matches them to a liquidity provider and returns the payment details. The L2 simultaneously locks the equivalent value of USDT in escrow.
The merchant then has limited time to confirm the payment or the funds will be released into the liquidity pool. Once both parties confirm receipt of funds, the L2 releases the USDT to the merchant’s Krayon wallet, net of the L2’s fees.
Example, using the Traditional Fiat method:
Example using Klear:
Klear’s network uses a Proof-of-Stake consensus mechanism, integrating the native $KLEAR token into its infrastructure.
Validators who play an instrumental role in maintaining the network's integrity will be required to stake $KLEAR as a means of participation. In return, they will receive rewards derived from the transaction fees generated.
As part of its revenue utilization strategy, Klear token will generate revenues from network fees, which are then distributed to Staked token holders.
Incentives will also be provided to liquidity providers in the form of token enhancements to returns and payment generators like other platforms, including Krayon, who provide payment flow and are also then eligible for token rewards, thereby increasing the fees they receive.
Klear token serves the following purpose.
The total supply will be fixed at 1,000,000,000.
Transaction Fee: The L2 network will charge a 100 bps spread on the FX that is provided (network fee). This is charged as settlements occur.
Fee share:
Klear tokens are used to boost yields earned by liquidity providers to incentivize early adopters.
(eg: Typical spreads earned on FX are 3% and with additional Klear token rewards we can boost this to 5-6% for each transaction)
50bps will also accrue to staked Token Holders. This will ensure the long-term viability of the network by encouraging token holders to support the network in the long-term.
Klear is structured to provides incentives from several groups of participants:
Liquidity providers - Earn a spread on the FX rate, and token rewards for providing liquidity to the network. They care most about order flow and this is measured by transaction volumes and velocity of turnover.
Validators/Stakers - Are rewarded based on a percentage of the network fees.
Merchants- Receive a discount of 25% by holding the Klear token and are also motivated by access to local fiat payment methods and liquidity in these markets.
Direct network effects - Occur when more liquidity providers and merchants result in more payments flow which creates a more efficient payments market and tighter spreads.
Cross network effect: The more merchants drive flow to the network the more attractive it becomes for liquidity providers who can reduce turnaround time on capital and increase turnover.
Below is a short discussion of Klear’s governance system. The system, it’s parameters and
rules are subject to change.
To achieve an ecosystem that is widely adopted there needs to be safeguards in place in the form of KYB/KYC to ensure security and safety of use. Therefore, initially this will be a permissioned network.Longer term there may be elements of decentralization.
This model initially will involve a Governing Council carefully selected from core team members, shareholders, participants and business partners.
This council will initially use an off-chain governance model.
Governance participants can create proposals (including decentralization) and there will be voting. If decentralization is deemed to be the path forward it would happen over time in phased increments after careful consideration at each phase.
Klear tokens can be staked to earn voting points based on the amount and duration staked. Points cannot be transferred.
Klear tokens enables a incentive structure that has transparent governance, and provides partners, investors and community the ability to shape Krayon and Klear over time. Things that could be voted upon include: product and token development features, fee models, staking parameters (duration, quantity), voting parameters.
Klear native token has a cap set on 1,000,000,000 tokens.
Up to 15% will be sold in private and public sale, 15% will be allocated to team and existing investors, 10% to partnerships.
- Pre seed round completed December 2022
- Wallet infrastructure launch in June 2023
- Payments Launch in December 2023
- Public sale completion in November 2024
- Token Generation Event in December 2024
Payments and remittances by corporates are a key area where crypto adoption is poised to take-off. Historically, banks have been at the center of cross-border payments, dominating the space with little competition. Cross-border payments are a $156 Trillion market (growing at 5% CAGR, link), and banks have benefited from this monopoly. This monopoly has resulted in various pain points for consumers and businesses, as settlement times are long, transaction costs are high, and accessibility is limited. While the above issues are less likely to occur for liquid currency pairs such as USD/Euro, the pain points mentioned are further amplified when we talk about exotic currencies, where liquidity is less deep.
In response to these industry challenges, we’ve introduced Klear, an innovatively engineered Layer 2 network on Ethereum. This combines fiat infrastructure and the ability to accept local payment methods with a crypto settlement and a native decentralized payment and settlement network.
