ASSET BACKED DIGITAL CURRENCIES

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MANAGING THE TRANSITION TO THE
ASSET-BACKED DIGITAL ECONOMY
As the l egacy gl obal banki ng system fai l s, there i s a need to assi st and
advi se the poor, yet resource ri ch, emergi ng nati ons i n the transi ti on to the
new di gi tal economy.

Thi s process begi ns wi th val ui ng the vast natural resources and preci ous
mi neral s (gol d, di amonds, cobal t, oi l , gas, cocoa, etc.) avai l abl e i n the
emergi ng nati ons.

By usi ng the val ue of such assets to col l ateral i ze newl y-i ssued currenci es
(cal l ed "Asset Backed Currenci es") for the benefi t of the col l ecti ve
soverei gn of the peopl e of such Emergi ng Nati ons, the resul t wi l l be a
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dramati c and posi ti ve i mprovement i n the real i zed weal th of the peopl e.

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Two transformative circumstances have recently became available.

I . The ODL/Li qui di ty Hub products offered by Ri ppl e Labs, I nc. Thi s
pl atform provi des “on-demand l i qui di ty” to otherwi se i l l i qui d currency
and di gi tal asset markets/pai rs usi ng the di gi tal vi rtual currency known
as XRP. 2

I I . The occurrence of geopol i ti cal events resul ti ng i n the BRI CS nati ons
whi ch col l ecti vel y represent over one quarter of the worl d’ s l and and
40% of the gl obal popul ati on. 3

Other nati ons are al so “opti ng out” of usi ng the US dol l ar for cross
border commodi ti es transacti ons, desi ri ng i nstead to i mpl ement an Asset
Backed Currency system 4 (e.g. Russi a). Thi s group i s referred to as
“Accel erated Di gi tal Adopti ng Nati ons.”

I t i s expected that these Asset Backed Currenci es wi l l become di gi tal

(hence the name “Asset Backed Di gi tal Currenci es” or “ABDCs”) and
adopted as the desi red payments systems for engagi ng i n cross
border commodi ti es transacti ons.

Thi s i s i ni ti al l y expected among the commodi ty produci ng areas wi thi n

the BRI CS nati ons and expandi ng i nto South Ameri ca, the Mi ddl e East
and Europe.

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Emergi ng Nati ons wi l l need assi stance i n the
transi ti on to the new di gi tal economy. A
successful l aunch requi res a uni que team that i s
capabl e of provi di ng a hi gh l evel of such
transi ti on advi sory servi ces.

Advi sors i n thi s process shoul d have knowl edge,

experi ence, l eadershi p and achi evements i n the
emergi ng di gi tal asset sector, and partnershi p
experi ence wi th gl obal commodi ti es tradi ng
enterpri ses, such as Navexwan
(www.navexwan.com).

Through thei r extensi ve network i n the di gi tal

asset sector, advi sors wi l l bui l d rel ati onshi ps
wi th l eadi ng di gi tal asset busi nesses to provi de
the technol ogi cal experti se to create,
col l ateral i ze and i ssue ABDCs on behal f of
Emergi ng Nati ons.

Advi sors wi l l engage the resource reserve

engi neers to provi de l i censed and certi fi ed
reserve reports of the resource commodi ty
assets i n pl ace (the “Asset Reserves”).

They wi l l al so use the determi ned present val ue

of such Asset Reserves to col l ateral i ze the
desi gnated di stri buted l edger network on whi ch
the ABDCs are transmi tted.

Fi nal l y, Emergi ng Nati ons must be provi ded

access to the physi cal commodi ti es tradi ng
network and rel ati onshi ps wi th commodi ti es
producers and suppl i ers worki ng wi thi n the
Accel erated Di gi tal Adopti ng Nati ons to obtai n
base commodi ti es resources (food and energy).

Thi s wi l l ensure that the peopl e remai n outsi de

5
the gri p of the l egacy banki ng system.
4
I n connecti on wi th the transi ti on, Emergi ng Nati ons may conduct
si gni fi cant “ai rdrop bl asts” of uni versal basi c i ncome to the peopl e
(parti cul arl y to the el derl y) i n the form of the newl y i ssued ABDC.

These funds may be pai d as a royal ty to the peopl e deri ved from the
devel opment of appropri ate commodi ti es tradi ng i nfrastructure (i .e.,
shi ppi ng ports, roads, and communi cati ons) and commodi ti es tradi ng
market acti vi ti es.

These royal ty payments may conti nue fol l owi ng the transi ti on peri od as
the Asset Reserves are produced and/or consumed – to the extent not
renewabl e (e.g., agri cul tural commodi ti es) – i n gl obal trade.

Such royal ty payments may be cal i brated and programmed i nto the
di stri buted l edger network of the appl i cabl e ABDC, whereby the
payments are automati cal l y di stri buted di rectl y to the peopl e wi thout the
need of a central i zed counterparty.

Thi s i s i n contrast to the current l egacy banki ng system, whi ch i s hi ghl y

central i zed.

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INTEROPERABLE LIQUIDITY
The gl obal economy i s experi enci ng a network effect wi th respect to
the adopti on of di gi tal assets and vi rtual currenci es, i ncl udi ng central
bank di gi tal currenci es (“CBDCs”), ABDCs and publ i c cryptocurrenci es –
l i ke Bi tcoi n.

Di gi tal Asset Currenci es must be i nteroperabl e for there to be

suffi ci ent l i qui di ty to ensure i ts success.

Each Di gi tal Asset Currency exi sts upon i ts own speci fi c network and
operates pursuant to i ts own speci fi c protocol , such as proof-of work
(“PoW”), proof-of-stake (“PoS”) and consensus protocol s.

Because of the network-speci fi c attri butes of each Di gi tal Asset

Currency, most are i ncapabl e of communi cati ng val ue from i ts nati ve
network to another network protocol that uses a di fferent currency as
i ts nati ve val ue-transmi tti ng asset.

The ci rcumstance i s no di fferent than a nati ve Engl i sh-speaki ng person

attempti ng to engage i n conversati on wi th a nati ve Russi an-speaki ng
person (absent one havi ng knowl edge of the others’ l anguage), thei r
l anguage protocol s are si mpl y not compati bl e or “i nteroperabl e, ” as
commonl y referred wi thi n the di gi tal asset sector.

XRP i s the nati ve val ue transmi tti ng asset on the decentral i zed
di stri buted l edger protocol known as the XRP Ledger or “XRPL.” The
XRPL i s i nteroperabl e wi th vari ous network protocol s that support other
Di gi tal Asset Currenci es and di gi tal assets (l i ke tokeni zed securi ti es
and bonds) whi ch means the val ue bei ng transmi tted by XRP may be
transferred to another network protocol .

The i nteroperabl e nature of XRP si gni fi cantl y enhances the avai l abl e
l i qui di ty i n the broader currency and asset markets because a user may
transform anythi ng of val ue i nto anythi ng el se of val ue – so l ong as i t’ s
di gi tal .

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Moreover, Ri ppl e announced i ts “Li qui di ty Hub” product wi l l be avai l abl e for
enterpri se use whi ch means that enterpri ses can easi l y and effi ci entl y source
other di gi tal assets from the broader di gi tal asset marketpl ace.

As a di gi tal asset l i qui di ty pl atform bui l t for enterpri ses, Li qui di ty Hub wi l l
unl eash the potenti al to access deep l i qui di ty wi thi n markets, accel erati ng
the shi ft to Di gi tal Asset Currenci es.

Li qui di ty Hub l everages smart order routi ng to source di gi tal assets at

opti mi zed pri ces from market makers, exchanges, and over-the-counter
(“OTC”) desks.

Enterpri ses wi l l use Li qui di ty Hub to easi l y and seaml essl y provi de thei r end
customers wi th the abi l i ty to buy, sel l and hol d di gi tal assets at the best
possi bl e pri ces across a range of venues.

Li qui di ty Hub sol ves speci fi c pai n poi nts of enterpri se customers, avoi di ng
l ong and resource-heavy i ntegrati ons through a streaml i ned appl i cati on
programmi ng i nterface (“API ”), and el i mi nati ng pre-fundi ng requi rements
that wi l l free up worki ng capi tal .

Li qui di ty Hub wi l l i ni ti al l y support Bi tcoi n (BTC), Ethereum (ETH), Li tecoi n

(LTC), Ethereum Cl assi c (ETC), Bi tcoi n Cash (BCH) and XRP (avai l abi l i ty wi l l
vary by geography) wi th pl ans to add addi ti onal di gi tal assets over ti me.

7
THE NATIONAL SWITCH: TRANSITION
TO NEW DIGITAL ECONOMY
Many Emergi ng Nati ons are currentl y engaged wi th thi rd party servi ce
provi ders, fi ntech compani es and mobi l e money operators to establ i sh a
“Nati onal Swi tch” wi thi n thei r nati ons. 6

Once the Emergi ng Nati ons establ i sh a “Nati onal Swi tch, ” thei r central
banks, commerci al banks, and commodi ti es tradi ng compani es obtai n access
to the extensi ve l i qui di ty resources that are bei ng made avai l abl e i n the new
di gi tal economy.

The “Nati onal Swi tch” enabl es i nteroperabi l i ty of ABDCs (and other Di gi tal
Asset Currenci es) wi th the l egacy banki ng system, faci l i tates broader and
more effi ci ent access to fi nanci al servi ces across the country/regi on,
accel erates the growth of di gi tal fi nanci al servi ces and reduces the use of
cash.

The “Nati onal Swi tch” al so provi des i nteroperabi l i ty to exi sti ng fi nanci al
servi ce provi ders’ swi tches and al l ows for future scal abi l i ty to accommodate
addi ti onal payment servi ces such as card producti on, ATM and POS
management, connecti vi ty to regi onal and i nternati onal gateways.

COLLATERALIZING ABDCs
The process to col l ateral i ze a newl y i ssued ABDC i s si mi l ar to the asset
securi ti zati on process. The pri mary di fference i nvol ves the use of the
bl ockchai n and di stri buted l edger technol ogy i n l i eu of tradi ti onal debt
securi ti es.

An effort must be undertaken to i denti fy the Emergi ng Nati on’ s Asset

7
Reserves and determi ne the present val ue of such Asset Reserves i n pl ace.

The nati on may need to enter i nto partnershi ps to construct and operate the
i nfrastructure to devel op and produce such Asset Reserves and devel op an
audi tabl e, seri al number i denti fi cati on system to “attach” the physi cal
commodi ty (once produced) to the ABDC. Al l of thi s i nformati on i s i mmutabl y
stored on the appl i cabl e DLT network. 8
One such process presentl y bei ng pursued i s the Soverei gn Gol d Bond
(“SGB”) proj ect bei ng undertaken by the Government of I ndi a and the
Reserve Bank of I ndi a (“RBI ”).

SGBs are government securi ti es denomi nated i n grams of gol d and

essenti al l y act as a substi tute for hol di ng gol d di rectl y. The government wi l l
use i ts Rupee (or cash) to source and purchase gol d and secure such gol d i n
the governmental vaul ts.

The RBI i ssues SGBs on behal f of the government based upon the gol d
col l ateral hel d i n the government’ s vaul t. The SGBs are sol d to commerci al
banks and i nvestors, and i n the process, such SGBs are “mi nted” or
“di gi ti zed” i nto di gi tal assets – and may be further used to col l ateral i ze
I ndi a’ s new CBDC.

The SGBs wi l l exi st and be transferred on the Stel l ar bl ockchai n, and the
CBDC wi l l become i nteroperabl e wi th other Di gi tal Asset Currenci es through
the XRPL usi ng XRP.

To further support such “col l ateral i zati on process, ” the BRI CS nati ons have
establ i shed the New Devel opment Bank and brought together several
materi al commodi ti es proj ects (i ncl udi ng gol d mi ni ng proj ects) bei ng
8
undertaken by vari ous parti es wi thi n thei r j uri sdi cti ons.

9
Notabl y, the Kl uchevskoye Gol d Mi ni ng Proj ect (“KGM Proj ect”), l ocated i n
Chi ta Regi on of Russi a, i s proj ected to yi el d 6.5 – 8 tons of gol d annual l y,
and return net profi ts of approxi matel y US$2 bi l l i on per year. 9

The KGM Proj ect i s bei ng undertaken by a j oi nt venture where I ndi a

(i ndi rectl y through Sun Gol d) hol ds a 30.0% i nterest i n the j oi nt venture and
Chi na (i ndi rectl y through Chi na Gol d) hol ds a 70.0% i nterest i n the j oi nt
venture.

Addi ti onal capi tal resources are bei ng provi ded to the KGM Proj ect from
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i nvestment funds and cooperati ves l ocated i n Brazi l and South Afri ca.

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 P R O C E S S
CONNECTING PHYSICAL ASSETS TO DIGITAL CURRENCIES

2 Value Determination
Calculate the forecasted value of
1 Property Rights
1
the asset using net present value
Determine which property methodology
rights are included in the
digital asset 2
3 Generate Report
Reserve report (similar to audit)

3 verifies accuracy and authenticity

of the asset and corresponding
value

4 4 Asset Creation
6 Add Serial Numbers Physical asset is mined,
Unique sequential serial numbers drilled or otherwise

5
added to each asset in preparation made available
for 1:1 relationship with digital asset

6 5 Asset Refinement
7 Mint Digital Asset Process asset to remove any impurities or
Generate digital assets on the ancillary non-value components

7
blockchain that correspond 1:1
with physical assets

8 Verification
Implement process to verify 8
that physical asset serial
numbers exist ongoing

10 Currency Management
9 Using verification tools, remove any currencies
10 from the circulating supply should the physical
asset be destroyed or otherwise no longer
9 Paper Currency available
If desired, sovereign nations can also issue a paper currency
that corresponds 1:1:1 with the digital currency and the physical
assets backing the currency PA
PAGG
E E3 8 1 1
 CONTACT US

VALHIL ADVISORS LLC

800 WILCREST, SUITE 206
HOUSTON, TEXAS 77042 USA
EMAIL: [email protected] 12
ENDNOTES
1.According to “Debt Data Portal,” published by Debt Justice at https://data.debtjustice.org.uk, Emerging
Nations facing debt crisis include many (a) African nations, including Cameroon, Ghana, Liberia, Nigeria and
Sierra Leone, (b) South American nations, including Argentina, Colombia, Suriname and Venezuela, and (c)
Central American countries, including Belize, Costa Rica, El Salvador and Panama.

2. Ripple Labs, Inc. is an American technology company which develops the Ripple payment protocol and
exchange network. Originally named OpenCoin and renamed in 2015, the company was founded in 2012 and is
headquartered in San Francisco, California.

3. The BRICS countries, namely Brazil, Russia, India, China, and South Africa, are considered the five foremost
emerging economies in the world.

4. In April 2022, the Russian central bank moved to fix the price of 5,000 rubles to a gram of gold. Following
the announcement, Russia’s finance ministry also announced that it would require payment for oil, natural gas
and other of its significant commodity exports in rubles – now “goldbacked.” As of the time of this writing, the
Russian ruble to US dollar pair increased in value from a low of 120:1 (immediately following the implementation
of SWIFT sanctions by the Western NATO alliance countries) to 57:1. Few Western investors or executives noticed.

5. See, e.g., Sri Lanka defaults on foreign debts, prepares to implement IMF austerity,
https://www.wsws.org/en/articles/2022/05/24/swvq-m24.html

6. For example, the government of Sierra Leone received financing from the World Bank towards the cost of
Sierra Leone’s financial inclusion
project, a portion of which was applied towards the creation of Sierra Leone’s National Switch. See Request for
Bid, Sierra Leone National
Switch (Design, Supply and Installation) (Without Prequalification) (Issued February 7, 2020),
https://mof.gov.sl/wpcontent/
uploads/2020/03/Bid-Extension-SPN_RFB-for-Sierra-Leone-National-Switch-Design-supply-and-Installation.pdf

7. The relevant Asset Reserves will vary from Emerging Nation to Emerging Nation. For example, African
countries are resource wealthy in gold,
diamonds and other resource commodities that are necessary for technology – like cobalt, whereas Middle
Eastern nations are more resource
wealthy in hydrocarbon-based commodities.

8. See, e.g., New Development Bank and State Bank of India Sign Memorandum of Understanding to Establish
Partnership,
https://www.ndb.int/press_release/new-development-bank-state-bank-india-sign-memorandum-understanding-
establish-partnership

9. See Indian-driven gold mining project in Russia praised at BRICS Summit (July 27, 2018),
https://timesofindia.indiatimes.com/business/international-business/indian-driven-gold-mining-project-in-
russia-praised-at-bricssummit/articleshow/65157455.cms

10. See id.

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