Redemption process

This section describes the overarching redemption process that needs collaboration between issuers and distribution platforms.

The term redemption is used here to refer to all kinds of lifecycle events of a security that involve the reduction of a balance of an investor account. Such as a repayment of a bond at the end of the runtime of the contract or a full or partial cancellation of a bond during the runtime of the contract - either by the issuer or by the investor

Account balances cannot be directly deducted from the associated wallet addresses without the consent of the account holder. Therefore, when a redemption is planned to be executed, the account holder needs to trigger a transfer to a dedicated issuer wallet address set up for the product during product creation. Once the transfer is complete, the issuer can trigger the deletion of the balance from the issuer wallet address.

The redemption process involves the following steps:

1. Redemption notification: The issuer publishes information about an upcoming redemption. The information includes the issuer wallet address.

2. Redemption execution: The redemption execution fixates the wallet addresses and redemption amounts for theses wallet addresses. Now, the account holders have time to transfer the amount to the issuer wallet address until the redemption payment date.

3. Redemption payment: All amounts which have been transferred to the issuer wallet address are eligible for a redemption payment.

All process steps can happen simultaneously. For example, if an investor cancels a bond contract, after receiving the cancellation, the issuer (1) notifies the investor about the redemption, (2) executes the redemption and (3) triggers the repayment at the same time.

Let's have a closer look at the individual steps of the redemption process.

Redemption notification

The first step of the redemption process is for the issuer to notify the owners of all eligible wallet addresses about the upcoming redemption. The notification needs to contain the following information:

• ISIN or other identifier of the security

• Network and smart contract account address of the security on the network

• Number of shares / percentage of shares eligible for redemption

• Redemption execution date and time

• List of wallet address eligible for redemption (or "all", meaning all addresses with a positive balance at the redemption execution date)

• Issuer wallet address used for the redemption

The issuer directly communicates with the distribution platforms where the product is listed or uses a service provider.

Redemption execution

The redemption execution must be started exactly at the redemption execution date and time. At this point, the list of wallet addresses that will be considered for the redemption is fixated. Prior to the redemption execution date and time, investors still have the option to buy the security to benefit from the redemption (given that this new wallet address is on the list of eligible addresses published in the redemption notification). Transfers that happen after the redemption execution date and time will not affect this.

At the redemption execution date and time, you may use the statistics report, the Cashlink Studio or data provided via the investment endpoint of the Issuer API to determine the list of eligible wallet addresses and corresponding redemption amounts.

Owners of wallet addresses eligible for a redemption now need to transfer the eligible amount to the issuer wallet address. The issuer wallet address has been published by the issuer as a part of the redemption notification.

Redemption payment

After the redemption has been executed, the transfers can be retrieved and verified using the Cashlink Studio, the statistics report or via the investment endpoint of the Issuer API. Only such owners of wallet addresses are eligible for a payment, that have successfully transferred the amounts to the issuer wallet address.

Based on the list of successful redemption transfers the issuer will calculate the redemption payment amounts. Those amounts will be paid out to investors reduced by capital gains taxes if applicable.

After the redemption payment is successful, the amount can be deleted from the issuer wallet address. This can be triggered via the Cashlink Studio or the Issuer API.