Carats User Agreement
Last Modified: May 10, 2024
Carats are cryptographic tokens that represent legal and beneficial ownership of a specified amount of DS Commodities (defined below). Carats are issued by the Carats Smart Contract upon the staking of a BCC Token or BCB Token associated with a tangible DS Commodity held in custody administered by DS Admin Trust, all administered by the Carats Foundation, a Cayman Island foundation operated as a decentralized autonomous organization that is governed by Bitcarbon token holders (the “Foundation”). The Foundation has engaged DS Admin Trust (the “Trust”) to administer the global custody of DS Commodities that issue and are redeemable for Carats. The BCC and BCB cryptographic tokens which accompany and certify ownership of whole DS Commodities are issued by Diamond Standard Ltd. (“DSL”) under regulatory supervision of the Bermuda Monetary Authority. Unlike BCC and BCB tokens, Carats and Bitcarbon tokens are not supervised by the Bermuda Monetary Authority. By using Carats, you agree to be bound to the terms of this Carats User Agreement (the “User Agreement”) by and between you and the Parties. If you do not agree to all of the terms set forth herein, please immediately discontinue your access to, and use of, Carats.
Section 1. Ownership of DS Commodities
The Trust acts as bailee of certified natural diamonds that are incorporated into physical coins (“DS Coins”) and bars (“DS Bars,” and together with DS Coins, “DS Commodities”). The DS Commodities are held by the Trust by Carats holders as bailors. Each DS Coin contains eight to nine diamonds of individual weight between 0.18 to 0.75 carats encapsulated within a 35mm diameter transparent coin-shaped object. Each DS Bar contains diamonds of individual weight between 0.76 to 2.05 carats encapsulated within a 70mm by 35mm transparent bar-shaped object.
Each Carats token represents legal and beneficial ownership of a specified amount of DS Commodities maintained by the Trust as a fungible bulk on behalf of Carats owners within vaults operated and insured by Brinks, Loomis, Malca-Amit and/or any other precious metals service providers approved by the Parties (the “Service Providers”).
Each Carats token is an electronic document of title that represents ownership of a portion of an identifiable fungible bulk of DS Commodities. Carats does not evidence ownership of an individually identifiable DS Coin or DS Bar. As explained in Section 3 below, the portion of the identifiable bulk to which a given Carats token relates decreases over time as service fees accrue to the Parties. The current ratio of Carats per DS Coin or DS Bar (as applicable) is available here [https://bitcarbon.com] (the “Carats Ratio”).
Section 2. Technical Specifications
Carats are issued on the Hedera Hashgraph network, and other blockchains. Carats are freely transferable peer-to-peer and divisible into fractional units by up to 18 decimals. A transfer of ownership of Carats results in a corresponding transfer of ownership of the corresponding DS Commodities as well as the benefits and burdens of the DS Commodities.
Carats may be transferred to the Ethereum blockchain through a “bridge” maintained by the Parties (the “Bridge”). Once transferred to the Ethereum blockchain, the original Hedera-based Carats token(s) will be locked and new units of Carats token(s) will be generated on the Ethereum network as ERC-20 tokens. A holder who uses the Bridge to transfer Carats to Ethereum may subsequently transfer Carats back to the Hedera Hashgraph network using the Bridge and, upon doing so, the corresponding Ethereum-based Carats will be locked. The Bridge is a component of the Parties’s Carats platform (the “Platform”). Please carefully review the Carats Platform Terms of Use [also available at https://bitcarbon.com] before using the Bridge.
Section 3. Service Fees; Taxes
Carats are subject to an inflation mechanism that causes the number of Carats per unit of DS Commodity to slowly increase over time. A smart contract manages the issuance and redemption of Carats, as underlying DS Commodities are added to or removed from the vaults. This smart contract creates additional Carats on a periodic basis, in the amount required to pay the operating expenses, primarily the cost of physical custody. These additional Carats, divided by the total number of Coins and Bars managed by the smart contract, will be added to the number of Carats required to redeem a unit of DS Commodity.
Carats produced as a result of the inflation mechanism (“Fees”) accrue to the Trust for the payment of operating expenses. The Trust may sell these Carats for funds, or redeem the Carats for the underlying DS Commodities and subsequently convert those into other proceeds to cover its operational costs, including expenses related to the physical custody of the DS Commodities, which are hosted in vaults maintained by the Service Providers at certain locations which are described, along with the current Carats Ratio here [https://bitcarbon.com].
You are solely responsible for the payment of any and all taxes, levies, imposts, duties, charges, assessments or fees of any nature imposed by any tax authority with respect to your Carats, the underlying DS Commodities and all transactions related thereof.
Section 4. Redemption
If you satisfy the redemption requirements set forth in Section 4(C) below, you may redeem your Carats for a Bitcarbon Coin token (a “BCC Token”) or Bitcarbon Bar token (a “BCB Token”). While BCC Tokens and BCB Tokens are randomly allocated to persons who effect a redemption of Carats in accordance with the terms set forth herein, each BCC Token and BCB Token, respectively, is associated with a particular DS Coin or DS Bar held in fungible bulk. Thus, although Carats are not associated with a specifically identifiable DS Commodity, by redeeming Carats for a BCC Token or BCB Token, you become eligible to take delivery of a specific DS Coin or DS Bar identified by the BCC Token or BCB Token that you receive upon redemption.
You may redeem your Carats for a BCC Token or BCB Token and exercise your right to delivery of a DS Coin or DS Bar through the Platform at any time, in your sole discretion and subject to the eligibility requirements set out in Section 4(C), the terms and conditions of this User Agreement and the Diamond Standard Coin Terms of Sale [also available at https://www.diamondstandard.co/regulated-offering].
You must satisfy each of the following eligibility requirements to redeem your Carats for a BCC Token or a BCB Token:
You have an account in good standing on the Platform;
You own an amount of Hedera-based Carats equal to or greater than the then-current Carats Ratio; or you own an amount of ERC-20-based Carats equal to or greater than the then-current Carats Ratio which will be converted from ERC-20 Carats to Hedera Carats, and you may be required to pay a fee to cover the cost of ETH gas.
You are not: (i) the subject of any sanctions administered or enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the U.S. Department of State, the United Nations Security Council, the European Union, Her Majesty’s Treasury or any other relevant sanctions authority; (ii) identified on the Denied Persons, Entity or Unverified Lists of the U.S. Department of Commerce’s Bureau of Industry and Security; (iii) located, organized or resident in a country or territory that is, or whose government is, the subject of economic sanctions, including, without limitation, Russia, Crimea, Cuba, Iran, North Korea or Syria; or (iv) a senior foreign political figure, or any immediate family member or close associate of a senior foreign political figure.
Section 5. Risks; Disclaimers
You acknowledge that the Hedera Hashgraph and/or Ethereum blockchains may experience backlogs, higher than normal transaction fees, changes to the network or a failure or fork in the protocol. The Parties do not own or control the Hedera Hashgraph or Ethereum blockchain, are not responsible for the operation of the networks and make no guarantees regarding each network’s security, functionality or availability.
As a blockchain-based token, Carats may be compatible with software or other technology provided by third parties. You hereby agree that the Parties do not guarantee the security or functionality of any third-party software or technology and are not responsible for any losses of Carats due to the failure of third-party software or technology.
You acknowledge that Carats incorporates experimental and novel technology and that the use of such technology involves a high degree of risk. You hereby agree that you assume all risks in connection with your use of Carats and expressly waive and release the Parties from any and all liability, claims, causes of actions or damages arising out of or in any way relating to you obtaining or using Carats.
The Parties have the right and ability to freeze and upgrade all Carats tokens (on an aggregate basis) as part of the Hashgraph and/or ERC-20 smart contracts, regardless of where Carats are held or maintained. The Parties will take commercially reasonable efforts to notify you in advance of upcoming upgrades and provide information regarding the impact that such upcoming upgrades may have upon your use of, and access to, Carats.
The Parties may freeze, temporarily or permanently, your use of, and access to, Carats, with or without advance notice to you, if the Parties are required to do so by applicable law, at the request of a governmental agency or as required by a court order or other legal process. Carats that is subject to any freeze may become unrecoverable and unusable by you, and in certain circumstances, may be destroyed by the Parties.
Except as expressly set forth herein, Carats are issued on an “as-is” and “as available” basis. We hereby disclaim any and all express, implied or statutory warranties and conditions, including any warranties or conditions of non-infringement, merchantability, fitness for a particular purpose, availability, error-free or uninterrupted operation, and any warranties arising from a course of dealing, course of performance or usage of trade. To the extent that the Parties may not, as a matter of applicable law, disclaim any implied warranty or condition, the scope and duration of such warranty or condition shall be applied to the minimum extent permitted under such applicable law.
Without limiting the foregoing, we make no representations or warranties with regard to the supply of or demand for Carats on any secondary market that may arise.
In no event shall we be liable to you for any consequential, indirect, incidental or special damages of any type or nature however arising, including, without limitation, exemplary or punitive damages, lost profits or revenues or diminution in value, arising out of or relating to you obtaining or using Carats, whether or not the possibility of such damages has been disclosed to or could have been reasonably foreseen by you, regardless of the legal or equitable theory (contract, tort or otherwise) upon which the claim is based. In addition, under no circumstances shall the Parties’ aggregate liability under this User Agreement exceed [$10,000].
Section 6. Miscellaneous
You are solely responsible for the payment of any and all taxes, levies, imposts, duties, charges, assessments or fees of any nature imposed by any tax authority with respect to your Carats, the underlying DS Commodities and all transactions related thereof.
You agree that you will not use Carats to engage in or facilitate any activity that would violate, or assist in the violation of, any law, statute, ordinance, regulation or sanctions programs administered in any relevant country, including but not limited to OFAC, or which would involve the proceeds of any unlawful activity.
If any provision of this User Agreement is declared to be invalid, illegal or unenforceable by a court of competent jurisdiction, then the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby and the remainder of these provisions of this User Agreement shall remain valid, legal and enforceable to the fullest extent permitted by law.
This User Agreement will be construed in accordance with the laws of the Cayman Islands, as applied to contracts made and performed entirely therein, and without regard to conflicts of law principles. All disputes relating to this User Agreement shall be brought solely in the courts located in the Cayman Islands, and you hereby consent to the exclusive jurisdiction of such courts and waive any defense of forum non conveniens. YOU HEREBY EXPRESSLY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY OR AGAINST EITHER PARTY IN CONNECTION WITH THESE TERMS.
This User Agreement does not, and shall not be construed to, create any partnership, joint venture or agency between you and the Parties.
You shall not assign any of your rights or obligations under this User Agreement, and any purported assignment or transfer shall be null and void. This User Agreement constitutes the entire agreement between you and the Parties with respect to Carats, and supersedes any and all prior or contemporaneous written or oral agreements or understandings between you and the Parties relating to Carats.
This User Agreement may be modified or revised at any time, with or without prior notice to you, unless stated otherwise. The most current version of this User Agreement will be available at: https://bitcarbon.com (the “Website”) with the “Last Modified” date at the top of the User Agreement changed. Any modifications or revisions will be effective immediately upon posting the modifications or revisions to the Website. You shall be responsible for reviewing and becoming familiar with any modifications or revisions. You waive any right you may have to receive specific notice of such modifications or revisions. Transacting in or holding Carats constitutes your acceptance of the User Agreement as modified or revised. If you do not agree to the User Agreement currently in effect, please immediately discontinue your access to, and use of, Carats.
This User Agreement shall become effective upon the date you first obtain Carats, and shall continue in effect for as long as you hold any Carats.
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