Etherfuse Liquid Mx, S.A.P.I. de C.V. ("Etherfuse Liquid") is the only Mexican blockchain company with a resolution from the financial authority (CNBV) confirming that its Tokens do not require authorization, registration, or concession by financial regulators. This gives Etherfuse® a unique competitive advantage in the Mexican market.

As a context, Etherfuse Liquid initiated -before the National Banking and Securities Commission ("CNBV") in Mexico- a procedure in order to be authorized ("Authorization Request"), in essence, to receive funds from the general public derived from the issuance and placement/trading of blockchain digital assets ("Tokens") whose possession brings with it the right to claim payments to be made by Etherfuse®, arguing that the characteristics of the Tokens could update the definition of Security provided in the Securities Market Law ("SML") whose public offering and placement requires prior authorization by the CNBV.

On April 16, 2024, the CNBV issued the Resolution P090/2024 through which, among other aspects, it states:

Pursuant to the above, it can be concluded that: (i) the above consideration issued by CNBV is a definitive administrative act that puts an end to the procedure, therefore, the services that Etherfuse Liquid intended by the Authorization Requested does not require authorization, registration or concession by the Mexican financial regulator; (ii) the administrative act only applies to Etherfuse Liquid, giving it a competitive advantage in the Mexican market; and, (iii) in any case, Etherfuse Liquid must comply with the applicable general regulations, particularly those related to the prevention of money laundering and the treatment of personal data.

Based on the foregoing, Etherfuse Mx, S.A. de C.V. ("Etherfuse Mx" or "Etherfuse®"), as part of the same business group of Etherfuse Liquid, by reverse solicitation -that is, by means of a private and direct invitation- offers to its customers the entering into an Agreement for the Provision of Services and Commercialization of Tokens derived from which Etherfuse® makes available to them an internet platform that Etherfuse® manages allowing them -to its customers- the acquisition of Tokens issued by Etherfuse® (hereinafter, "Stablebonds") upon payment made by the customer through USDC.

Stablebonds are digital assets issued by Etherfuse®, backed by government debt instruments such as Mexican CETES, US Treasury Notes, or UK Gilts. The backing allows holders to claim both the nominal value of the underlying assets and the generated rewards.

As a context, Stablebonds are digital assets issued through blockchain technology, which are backed by different financial assets through financial entities authorized in Mexico to operate. These financial assets backing the Stablebonds currently are: (i) Mexican government debt (CETES); (ii) US government debt (US Treasury Notes); and, (iii) UK Government liability (Gilt) (hereinafter referred to indistinctly as "Financial Assets").

The acquisition of each Stablebond generates the right in favor of its holder to claim: (i) the nominal value of the Financial Asset backing the Stablebond; as well as (ii) its accessories upon maturity of the Financial Asset, in its case.

The accessories are the amounts established by Etherfuse® through the Platform (hereinafter, "Rewards"), which source is the yield obtained on the acquisition of the underlying Financial Asset.

Etherfuse® generates revenue from:

• Commissions as a percentage of the Yields on Financial Assets acquired using customer funds, minus commissions charged by third parties and taxes.
• Yields on Financial Assets purchased with its own capital.

As a context, Etherfuse®´s commissions collection model is based on a variable structure. This structure is related to the yield (Y) of the underlying assets. The fee charged (f) ranges from 0.25% to 1.5%, based on the yield and risk level of the underlying asset as follows:

1. Low yield range (Y < 4.5%): A fixed commission of 0.25% is applied to products with a yield equal to or less than 4.5%.

2. Intermediate yield range: For products whose yield is in an intermediate range, the commission is calculated as follows:

   F%=0.2273*Y-0.7727

   This formula adjusts the commission proportionally to the performance of the asset, allowing the commission rate to increase as the performance increases.

3. High yield range (Y > 10%): Products with yields equal to or greater than 10% are subject to a fixed fee of 1.5%.

The general model looks as follows:

Y < 4.5% = 0.25% | F%=0.2273Y - 0.7727 | Y10%=1.5%

* Tax Withholdings: On both investments in Financial Assets (either with own capital or clients' resources), Mexican financial entities withhold 0.5% of the interest.

Financial Assets backing Stablebonds are held with authorized Mexican financial institutions. Etherfuse® has an internal policy that requires it to distinguish between its own investments and customer funds, this is dully reflected in its financial statements. Regular attestation reports ensure transparency and accurate reserves.

As a context, on a regular basis, an independent third party to Etherfuse® issues attestation reports focused in a process that aims on verifying the accuracy and control of Etherfuse®'s reported reserves of Financial Assets that back the Stablebonds based on cryptographic proofs provided by Etherfuse® in public blockchains, the reconciliation of these proofs with Etherfuse®'s internal records, interfaces and account statements issued by financial entities in Mexico.

The custodians of Etherfuse®'s Financial Assets include BBVA México, Actinver Casa de Bolsa, and Kuspit Casa de Bolsa. All institutions are financially stable and authorized by Mexican regulators.

As a context:

1. BBVA México, S.A., Institución de Banca Múltiple, Grupo Financiero BBVA México- As of November 1, 2024, this financial institution has a capitalization index of 19.57%, being in category I, i.e., without solvency problems and therefore not subject to any type of special preventive and/or corrective measures before the financial authorities. (Source)

   Its authorization can be found here

2. Actinver Casa de Bolsa, S.A. de C.V., Grupo Financiero Actinver- As of November 1, 2024, this financial institution has a capitalization index of 15.23%, being in category I, i.e., without solvency problems and therefore not subject to any type of special preventive and/or corrective measures before the financial authorities. (Source)

   Its authorization can be found here and here

3. Kuspit Casa de Bolsa, S.A. de C.V.- As of November 1, 2024, this financial institution has a capitalization index of 96.23%, being in category I, i.e., without solvency problems and therefore not subject to any type of special preventive and/or corrective measures before the financial authorities. (Source)

   Its authorization can be found here

With financial institutions, Etherfuse® enters brokerage agreements to manage and secure assets. For customers, the Agreement for the Provision of Services and Commercialization of Tokens outlines their ownership rights, including access to the Stablebonds and their associated claims.

As a context, with the financial institutions that are custodians of the Financial Assets, Etherfuse® enters into a brokerage agreement through which Etherfuse® grants a mandate for the performance of brokerage acts in the securities market, consisting of the execution of purchase, sale, custody, administration and deposit orders of such assets.

An Agreement for the Provision of Services and Commercialization of Tokens is entered into with the customers under which Etherfuse® provides an internet platform which it administers and allows its customers to acquire Stablebonds upon payment by the customer through USDC. The Agreement provides the customer with the right to claim: (i) the nominal value of the Financial Asset backing the Stablebond; as well as (ii) the Rewards linked to the holding of the Stablebond. The token holders are considered as owners of the Stablebonds and as such may exercise the rights of use and disposition of the Stablebonds, terms and conditions apply.

Yes, Etherfuse® has the ability to borrow. However, to date, Etherfuse® has not entered into any agreement in this regard.

Nevertheless, if Etherfuse® becomes in general default of its obligations and is declared insolvent, its customers may:

1. Exercise the action of separation of assets so that such assets will not be considered as part of the assets with which Etherfuse® will respond to its creditors.
2. Appear as a Common Creditor.

If Etherfuse® decides to dissolve, a liquidator will be appointed to manage operations, collect debts, and settle liabilities. The liquidator is responsible for making payments due to Stablebond holders, safeguarding their rights throughout the process.

As a context, pursuant to the Mexican General Corporations Law and Etherfuse®'s bylaws, the shareholders may hold an Extraordinary General Meeting to discuss and, if applicable, approve the early dissolution of the company and appoint a liquidator.

Among the functions of the liquidator are the following:

1. To conclude the corporate operations that may have remained pending at the time of dissolution;
2. To collect what is owed to the corporation and to pay what the corporation owes;
3. To sell the assets of the corporation and apply the profits obtained from such sale to the purposes of the liquidation;
4. To establish the necessary reserves to face any contingency, claim or risk of the Company;
5. To prepare a balance sheet of the Company's assets and liabilities and to pay what the Company owes;
6. Draw up a balance sheet indicating the share of each partner in the corporate assets, which must be published in the Public Registry of Commerce through the Integral System of Registry Management 2.0 administered by the Ministry of Economy for publicity purposes before third parties;
7. To cancel its registration before the Federal Taxpayers Registry;
8. To liquidate to each partner its corporate assets;
9. Obtain from the Public Registry of Commerce the cancellation of the mercantile folio and where the balance approved by the shareholders will be deposited.

Based on the foregoing, the rights of the holders of the Stablebonds are protected by the obligation of the liquidator to conclude the operations, make the payments due by Etherfuse® and maintain reserves.

Under the scenario where a creditor, through judicial proceedings, seizes Etherfuse®'s assets, the situation may arise where the bank accounts managed by Etherfuse® which contain customer's assets are seized as they are registered in Etherfuse®'s name.

Consequently, customers would be entitled to file a judicial action to obtain the release of their assets. This action is known as “tercería excluyente de dominio” and is regulated by the Commercial Code. The main purpose of the proceedings is to analyze who is the owner of the assets seized.

A key feature of this kind of proceedings is that it prevents creditors from taking title of the assets seized and/or selling them through public auction until proceedings are resolved. Customer's assets, therefore, will remain safe until a judgment declares that they were illegally seized.

If Etherfuse® were declared insolvent, customers have the right to separate their assets from the Etherfuse's assets. Customers can also act as common creditors if asset separation is not possible.

As a context, in Mexico, the purpose of the Mexican Bankruptcy Law is to establish the procedural rules for: (i) the declaration of insolvency proceedings of merchants; (ii) the recognition, ranking and priority of credits owed by the merchant; (iii) the execution of payment agreements with the company's creditors; and, in the event that the latter is not possible -among other cases- (iv) the declaration of bankruptcy of the merchants.

This legal framework is designed to ensure the preservation of the companies, to prevent the generalized noncompliance with payment obligations from jeopardizing the viability of the companies, with a portion of the merchant's assets being subject to the payment of the unfulfilled obligations.

A merchant is declared in insolvency if it defaults in the payment of its obligations on a generalized basis and is requested by the merchant itself or, as the case may be, is sued by any creditor or the authority in charge of the investigation and prosecution of crimes (Public Prosecutor's Office). The generalized default of payment consists of the non-compliance of payment obligations to two or more different creditors of the respective merchant and the following conditions are present:

1. That there are overdue obligations with at least thirty days of expiration and that these represent thirty-five percent or more of all the obligations owed by the referred merchant as of the date on which the petition or request for the declaration of insolvency has been filed;
2. The Merchant does not have assets to meet at least eighty percent of its past due obligations as of the date of filing of the claim or petition.

The assets that are considered for the purposes of the provisions of item b above are:

1. Cash on hand and deposits;
2. Time deposits and investments whose maturity does not exceed ninety calendar days after the date of filing of the claim or request;
3. Clients and accounts receivable whose term to maturity does not exceed ninety calendar days after the date of filing the claim or request, and
4. Securities for which purchase and sale transactions are regularly registered in the relevant markets, which could be sold within a maximum period of thirty banking days, whose valuation as of the date of the filing of the claim or request is known.

After the merchant has answered the claim, a visitor appointed by the Federal Judiciary Council goes to the merchant's establishment and the court declares that the merchant is in general default of payment, then the declaration of the insolvency proceeding is issued.

After the referred declaration, the conciliation phase begins, as well as the recognition, graduation and priority of credits owed by the merchant.

In the event that such declaration is issued, the Mexican Bankruptcy Law provides an action of separation of assets that may be exercised by the merchant's creditors in order for certain assets not to be considered as part of the assets with which the company will be liable before the other creditors.

In order for the above to be applicable, the referred law establishes that such assets in possession of the merchant over which the separation action is exercised must be: (i) identifiable; (ii) that the property of the corresponding assets has not been transferred to the merchant by a definitive and irrevocable legal title; and (iii) that the action is promoted by the legitimate owner of such assets.

Among the assets that may be subject to this separation action are those that have been received in administration, even if they have been exchanged for others by any legal title.

When the referred action is not applicable, the credits must be paid in the following order in terms of Articles 217, 221 and 224 of the aforementioned Law with the merchant's assets:

1. The credits in favor of the workers for salary or wages accrued in the last year and their indemnifications;
2. Those contracted for the administration of the merchant's assets or indispensable to maintain: (i) the ordinary operation; (ii) liquidity; (iii) security and/or asset expenses;
3. Privileged creditors (derived from cases of death);
4. Creditors with collateral (mortgage or pledge, duly registered in the corresponding public registry);
5. Tax credits;
6. Creditors with special privilege (who, according to the characteristics of the relationship, maintain a special right of retention, such as in the case of a lodging, consignment and/or transportation contract);
7. Common creditors (all those who do not meet any of the aforementioned assumptions);
8. Subordinated creditors (persons who have agreed to subordinate their rights with respect to the common credits, controlling companies or companies with a relationship in the administration of the company);

Based on the foregoing, if Etherfuse® becomes in general default of its obligations and is declared insolvent, its customers may:

1. Exercise the action of separation of assets so that such assets will not be considered as part of the assets with which the company will respond to its creditors, arguing that the USDCs were transferred to Etherfuse in administration, so they are entitled to the Financial Assets to which they were exchanged.
2. Appear as a Common Creditor, in the event that for any reason it is decided by the court that the aforementioned separation action is not admissible and its credit: (i) has been recognized by the conciliator based on the accounting and other information and documentation of Etherfuse® ("Provisional List"); or (ii) because it -the customer- requests it after the publication of the Provisional List.