Legal FAQs
This page is designed to answer the most common questions asked about Zoth, but if you are looking for more information or have any further questions, we or someone from our community on Telegram would be happy to respond. We encourage you to be part of our vibrant & supportive community.
What is tokenization?
Tokenization is the process of converting real-world assets, such as invoice factoring, invoice discounting, inventory financing, global trade finance, property, art, or securities, into digital tokens that can be stored, transferred, and traded on a blockchain network. It enables fractional ownership, increased liquidity, and transparency for traditional assets.
What is Zoth protocol?
Zoth is a DeFi lending protocol bringing emerging market real-world assets to serve small & medium businesses, not served by the regular banking system. Zoth bridges the gap between DeFi liquidity and RWAs in emerging markets. The liquidity module provides a framework to create liquidity for on-chain real-world assets. Zoth also enables the borrowers into the pool to get additional credit by collateralizing their loans.
Zoth is a protocol that facilitates the lending and borrowing of ERC-20 tokens by connecting borrowers and lenders. The protocol acts as a marketplace for loan pools, enabling lenders to earn yield by participating in these pools. The protocol provides the platform but does not participate directly in any deals. Investors must perform their due diligence before depositing funds in any available borrower pools.
Why Zoth Protocol?
Through the Emerging Market Index Fund, Zoth brings world-class assets into the hands of DeFi Lenders. We enable Asset Originators to use tokenized real-world assets as collateral to obtain liquidity from the DeFi ecosystem. We have a stringent onboarding process of the borrower & the assets. Zoth create a mutualization pool to de-risk the lender’s capital. The DeFi lender can easily invest in Zoth Index Fund to asset originator or borrowers and earn interest on their stablecoin.
Who can invest through Zoth?
Zoth is currently open for Institutions and accredited investors with valid KYC.
You are not a member of any sanctions list or equivalent maintained by the United States government, the United Kingdom government, the European Union, or the United Nations (collectively, "Sanctions Lists Persons") and you do not intend to transact with any Restricted Person or Sanctions List Person.
The protocol is not available to residents of Belarus, the Central African Republic, the Democratic Republic of Congo, Russia, the Democratic People’s Republic of Korea, Ukraine, Cuba, Iran, Libya, Panama, Somalia, Sudan, Syria, the USA (other than accredited investors), Yemen and Zimbabwe or any other country that has banned dealing with cryptocurrency or stablecoins.
You must have attained legal age in the jurisdiction in which you reside, and you have the legal capacity to enter into a contract.
What KYC documents are needed to sign up with Zoth?
Zoth would be seeking to submit a copy of passport, tax registration number along with selfie, as part of the KYC process. Zoth has implemented robust AML and KYC procedures to prevent money laundering and illicit activities. Our proprietary engine keeps scanning user identities, conduct due diligence, and monitor transactions for suspicious activities. Comply with AML and KYC regulations applicable to your jurisdiction.
How Zoth is protecting user data and privacy?
Protecting user data and privacy is crucial for our company. Implement strong security measures such as encryption, multi-factor authentication, and secure storage practices. Comply with data protection and privacy laws, including GDPR if applicable, to safeguard user information. Please review our Privacy Policy for more details.
What are the team doing to stay ahead of potential regulations changes?
Yes, there are legal considerations associated with tokenization, and we work closely with legal experts to ensure compliance with relevant regulations set forth by the authorities and to remain abreast of changes. Factors such as securities laws, anti-money laundering (AML) regulations, know-your-customer (KYC) requirements, and local jurisdictional regulations “must be” taken into account. Our platform incorporates necessary compliance measures to facilitate legal and regulatory requirements.
When tokenising assets, it also is crucial to consider various legal aspects, such as securities regulations, licensing requirements, intellectual property rights, consumer protection laws, and data privacy laws.
Is Zoth licensed or regulated by any authorities?
Zoth is a decentralized marketplace for borrowers and lenders, which is not required to obtain any license or required to be regulated by any authorities.
Borrowers on the platform are encouraged to seek their own legal opinion when borrowing funds on Zoth platform.
Lenders on the platform are encouraged to perform their own due diligence on the different deals and the risk involved when dealing with unregulated product. And in cases where the product is offered in a regulated environment, understand what that means for you fully.
Are there any cross-border legal considerations for tokenization?
Yes, tokenization often involves cross-border transactions and may be subject to different legal frameworks in various jurisdictions. We work closely with legal experts to navigate these complexities, ensuring compliance with local laws, international regulations, and tax obligations. Investors are also required to consult their experts to understand and comply with the legal requirements of their respective jurisdictions.
How safe is Zoth’s technology? Whether our smart contract gets audited?
Yes, Zoth contract is audited by industry experts & advisors.
What is the Platform Risk involved?
While we make the best attempt to eliminate platform risk and ensure that the platform operates predictably by undergoing code audits for major releases, we give no warranty and guarantees on the product and pool.
Do you have a mobile application?
Currently, we do not have any mobile application. Please do not trust any application with the name of Zoth on any play store or app store.
Can I sell my tokenized assets?
If the pool tenure is less, we have a lock-in-period equivalent to the pool tenure. For a pool with a longer duration, users can sell their tokenized assets on our marketplace or other compatible platforms. The tokens representing your fractional ownership can be traded peer-to-peer or on secondary markets, allowing you to exit your investment or sell your holdings to interested buyers. Users are requested to check details in the respective pool where they intend to invest.
How does Zoth assess the risk of the borrowers?
We have an in-house team to carry out due diligence before we onboard any buyer and use public databases like Coface, Credit Safe, as well. Please review our Onboarding & Risk Mitigation policy for more details.
How does the platform ensure funds are safe? What happens if a Borrower defaults?
Our team closely monitors the performance of the borrower on our platform and the companies whose invoice was discounted or factored.
We create a mutualized pool with around more than one borrower and the lender money goes to these different borrowers through that pool. This strategy reduces the risk of capital loss for the lender. In the worst scenario, if a borrower in that pool makes a default, Zoth also take insurance cover and in case of default, the insurance company settles the default claim. Users are requested to check details in the respective pool where they intend to invest.
What happens in the event of a default? What could you do as a lender?
Generally, Zoth or asset originator gets post-dated cheques or e-NACH from the borrower, and settlement happens automatically on the due date. Recourse mechanism differs from deal to deal and varies from borrower to borrower. Users are requested to check details in the respective pool where they intend to invest.
In the event of a delinquency (i.e. borrower is behind on payments), borrowers will be charged late fees on their loan. The late fee is imposed on top of the regular interest payment and are specified in the loan terms when the pool is created initially. Once the borrower gets back on schedule, additional fees are no longer being imposed.
In such cases, lenders will be receiving additional interest on their loans but may have a different repayment schedule than what was originally planned for.
In case of invoice factoring pool, the insurance company will settle the default and the extent of the settlement will depend on asset to asset, it may range from 70% to 100% of the principal lending amount. However, there may be some time that the insurance company will take time in claim settlement and user shall not be provided yield for that period.
In other kinds of default, the borrower may request to restructure the deal with the lenders. Zoth may act as a mediator in such scenarios to help both parties reach a favourable outcome. In the worst-case scenario, we can also initiate litigation or arbitration as a last resort for collection if there is no amicable solution.
The lenders must perform due diligence to understand what type of recourse is available to the lenders in the event of default.
How are you guys going to scale the business?
We intend to work with asset originators & Fintech lending companies to expand in new continents & geographies and identify borrowers ready to borrow funds in stablecoin.
Is legal advice provided to investors?
While our platform provides information and guidance related to tokenization, we encourage investors to seek independent legal advice specific to their individual circumstances. Legal advisors can provide personalized guidance on regulatory compliance, taxation, contractual, and any other legal concerns.
How are dividends or income generated from tokenized assets distributed?
The distribution of dividends or income generated from tokenized assets depends on the specific terms and conditions outlined in the “token agreement.” Typically, dividends or income may be distributed to token holders in proportion to their ownership. Our platform provides visibility into dividend distributions and ensures transparent record-keeping of income generated from tokenized assets.
Last updated