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About a month ago, Geneva-based fintech startup Mt Pelerin was unveiling the first tokenized shares to be issued on a blockchain infrastructure in full compliance with Swiss law, a technological and legal breakthrough that will bring liquidity and transparency to the sector.
In collaboration with the Capital Markets and Technology Association (CMTA), which counts among its members the likes of Swissquote, EPFL and Temenos, Mt Pelerin has succeeded in having its tokens recognized as shares. This means that when owning a Mt Pelerin token (MPS), an investor is owning a share of the company with voting and dividend rights and is protected as such by Swiss law.
In the last 20 years, capital markets have witnessed significant technological advances but recent developments in blockchain and distributed ledger technology (DLT) are now opening up the industry to the opportunity to fundamentally re-architect the way it works.
By simplifying many existing processes and stripping out significant inefficiencies associated with reconciliation, blockchain promises to bring unprecedented levels of efficiency, transparency and security.
Blockchain-based smart contracts can automatically verify and execute the terms of a contract without relying on a centralized business logic engine, thus removing intermediaries and achieving greater efficiency all the while maintaining auditability of transactions.
With the growing adoption of the tech, businesses are finding it convenient to adapt to the digitized crypto-version of equity shares. This year particularly, tokenized equity has emerged as a new trend for companies to raise capital in which a business issues shares in the form of digital assets such as cryptocoins or tokens.
Tokenized equity shares work the same way as traditional shares, except that they are in digital form, and instead of going into a demat account, they are credited to one’s blockchain-hosted account. This form of shares on a blockchain offers a lot of flexibility in fundraising by making it very easy for small investors to become shareholders. It also allows significant cost savings and higher liquidity to pre-IPO markets.
Bringing blockchain to the “old world of banking”
Recognizing the potential of blockchain, Mt Pelerin has applied the ground-breaking technology to its own shares for its initial round of funding, a first step towards its goal to becoming the first bank in the world to be entirely built on blockchain technology, the startup said in a statement.
Its mission, it says, is to create “a new kind of bank based on full reserve, marketplaces and tokenization.”
The Mt Pelerin solution will be based on the following key aspects:
- The Mt Pelerin solution will be based on the following key aspects:
- Full-reserve with 100% of customer deposits kept in highly liquid reserve;
- Marketplaces: Since Mt Pelerin will not be generating profit from lending deposits, it will instead propose products in the form of marketplaces regrouping in one place the offers from external providers and connecting the bank’s customers together;
- Tokenization: the Mt Pelerin bank will be entirely built on blockchain technology and deposits and assets will be systematically tokenized on the Mt Pelerin platform, allowing all kinds of assets to become easily divisible, transferable, manageable and liquid;
- A modular and open banking platform on top of which micro-services will be added as independent API based software bricks. Third parties will be able to connect to the platform add their own complementary bricks to it; and
- Free account and payment services without commitment including a multi-currency, multi-IBAN bank account and its debit card directly connected to the bank’s currency exchange marketplace, which promises to be 20 times cheaper than most debit cards offered today.
In a first move to establish its ecosystem, Mt Pelerin has open-sourced its Bridge Protocol, a technical framework for the issuance and the lifecycle of financial instruments on the blockchain that’s fully compliant with regulation.
The startup says it aims to obtain relevant Swiss banking licenses in late 2019. A preliminary process started in early 2018 with the help of two of the big four accounting firms and several of Switzerland’s best banking lawyers.
Mt Pelerin is currently running a token sale of its MPS tokens through which it hopes to raise CHF 2 million.
One token equals one share of the company Mt Pelerin Group SA, established in Geneva, with full voting and dividend rights. One share costs CHF 5.00.
The sale is open to anybody in Switzerland with a minimum investment of CHF 250, and CHF 1,000 for investors outside of Switzerland.
Tokens sold will be liquid and freely transferable after a lock-up period ending on January 31, 2019.
Investments can be done through Mt Pelerin’s website.
Featured image: Mt Pelerin illustration, via Twitter.