TL:DR;

• Invest in any asset (digital assets, real estate, stocks, etc.)
• Raise from any investor above 100k€, either with fiat or with stablecoins
• No size limitation (it can grow above 100M€ in AUM)

What is a Securitization Vehicle?

A securitization vehicle (SV) is a legal entity used to pool various types of financial assets (e.g., equities, loans, mortgages, receivables, digital assets) and convert them into tradable instruments. These instruments are sold to professional investors, providing a mechanism to raise capital and transfer risk. SVs are structured to isolate the assets and manage investor risk. 

Key Features:

• Asset Isolation: Assets are legally separated from the originator, ensuring bankruptcy remoteness and protection for professional investors.
• Capital Efficiency: Originators can optimize their balance sheets by converting illiquid assets into cash.
• Regulatory Flexibility: SVs can be tailored to fit different regulatory and tax frameworks, meeting both investor and originator needs.
• In-Kind Subscriptions: SVs can accept subscriptions as traditional bank transfers, or in-kind with almost any other type of asset, including digital assets.
• Investment Flexibility: Originators can deploy virtually any kind of investment strategy.

On-Chain Administration‍

Fume provides on-chain administration to tokenise the noteholder register and automate fee payouts. By harnessing smart contracts to accept both stablecoins and fiat, Fume minimizes manual errors and accelerates the overall subscription process.

Key Benefits

• Tokenized Noteholders Register: Enhanced accuracy and security for investor records.
• Automated Fee Payouts: Smart contracts ensure streamlined and timely distributions.
• Seamless Subscriptions: Acceptance of digital assets and traditional currency.
• Improved Compliance: Built-in KYC/AML processes reduce regulatory friction.

Why Fume?‍

Fume’s innovative on-chain solution strengthens investor confidence, reduces operational overheads and supports the growth of securitisation in Luxembourg. Its decentralised approach increases transparency while offering flexibility for diverse investment strategies.

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Why is Luxembourg a Top Jurisdiction ?

Established and Flexible Regulatory Framework

• Luxembourg is a AAA-rated jurisdiction for financial services, due to its political and economic stability, regulatory clarity and investor friendliness.
• Luxembourg offers a robust and flexible legal regime for securitization, governed by the 2004 Securitization Law following the Euro Medium Term Note (EMTN) Programme.

Tax Efficiency

• Securitization vehicles in Luxembourg may benefit from tax neutrality, ensuring professional investors only pay taxes on their income from the securities.
• No withholding taxes on interest or dividend payments made by the vehicle.

EU Access & Compliance

• Being in the EU, Luxembourg provides passporting rights, enabling cross-border distribution of securities throughout Europe. 
• However, SV are typically exempt from regulatory frameworks like the AIFMD. 

Experienced Ecosystem

• Luxembourg is home to a mature financial industry, with experts in legal, tax, accounting, and asset servicing specializing in securitization. A wide network of custodians, banks, and service providers enhances operational efficiency.

Structure and Key Roles

The Luxembourg securitization vehicle (SV) acquires assets or risks from the originator and issues investment instruments to investors. The value of such instruments, e.g. debt securities, ABS, CLNs, Certificates, Warrants, LPNs, etc., are linked to the underlying assets. Service providers support the SV, ensuring compliance and efficiency.

• Originator: The entity that transfers assets or risks to the securitization vehicle.
• Securitization Vehicle: A Luxembourg-based company that acquires the assets or risks and issues securities to investors.
• Investor: Entities or individuals who purchase the securities issued by the securitization vehicle.
• Investment Manager (not shown in the diagram): Managing pool of assets that have been securitised.
• Service Providers:
  
  • Auditor: Responsible for auditing the securitization vehicle's financial statements.
  • Administrator: Manages day-to-day operations and maintains records.
  • Custodian: Safeguards the vehicle's assets.
  • Paying Agent: Handles payments from and to investors. Regulated European Bank. ISIN issuer: financial market infrastructure and service provider (e.g. SIX Group).
• Regulator (not shown in the diagram): The Luxembourg Authorities, which may supervise the vehicle if it continuously issues securities to the public.

Eligible Assets

The portfolio can allocate its liquidity to any asset, ranging from digital assets (e.g. cryptocurrencies, NFTs, DeFi protocols), interest-bearing financial products, as well as any other traditional asset (equities, bonds, ETFs, real estate, …).

Eligible Investors

• No maximum number of investors.
• The minimum subscription amount per investor is EUR 100,000 (or equivalent in USD). 

Subscription Methods

1. Paying Agent: The investor provides the liquidity via a paying agent (through a LU- ISIN code). 
2. Direct subscription: After undergoing the KYC procedure according to the anti-money laundering (AML) regulations, the investor has the following subscription methods:
   
   1. In-kind Transfer: connecting the wallet to a smart contract responsible for issuing tokenized units. This ensures that only whitelisted addresses can deposit (e.g. stablecoins, such as USDT) and that there is no risk of manual error (pre-defined amounts and no copy-pasting of addresses).
   2. Fiat Transfer: the investor can subscribe by sending a traditional wire transfer (EUR or USD).

Setup Procedure & Timeline

• ≦ 5 days. Due diligence on the Originator.
• Signature of the engagement agreement and payment of a structuring fee.
• ≦ 3 days. Definition of the Offering Memorandum:
  
  • Description of the strategy & eligible assets
  • Fee Schedule (management, performance, subscription, and redemption fees)
  • Lock-up period and notice
  • NAV Frequency
• ≦ 2 days. Drafting the documentation: Now operation starts, at T+10.
• Optional ≦ 10 days, ISIN code registration to be used through a paying agent.  

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Book a meeting with Fume with Fume's team to learn more.