This article is written by one of our contributor Stefan Perlebach.
In our Series “Walk me through the process”, we will learn and understand more about the cost-saving effects & efficiency improvements blockchain technology / Security Tokens can bring to the financial industry.
This week we are welcoming Arnaud Salomon, CEO of Mt Pelerin, on a mission:
“to create a Swiss digital investment bank that will democratize the access to financing and investment”
What problem is Mt Pelerin trying to solve?
At Mt Pelerin, our observation is that today banks focus on working for the world of finance only, and increasingly neglect their original purpose of serving the real economy. Worse, they rely on leveraging the deposits of their customers to invest on the financial circuits. By taking risks on deposits without providing fair compensation, there is a growing imbalance in the relationship between banks and the society in general. Mt Pelerin wants to address the shortcomings of this model and put the real economy back at the center of the bank’s focus. To do so, we are building a new bank with a different business model that will reshape how capital flows between people and businesses. Built on the blockchain, it will capitalize on the benefits of security tokenization to facilitate and democratize the access to financing and investment tools.
Can you walk us through an example that illustrates the cost savings and other specific advantages by comparing a “traditional” and “new” process of a banking system?
One of the best examples is the new possibilities for businesses to access financing more easily. The platform we are building will regroup in a single place the ability to issue, sell and trade tokenized securities in a few clicks. With it, businesses of all sizes will have access to the same tools as big corporations do to raise funds and finance their growth, without the extremely high financial, legal and technical barriers that IPOs have. The cost of going public is, on average, $4.2 million plus 4 to 7% underwriting fees. This is clearly out of range for most companies,while an STO can achieve the same thing for a five-figure cost. We even have a free self-issuance option for companies who don’t need assistance to structure their offering. Issuers will also be able to create, sell and manage tokens that provide direct ownership of the underlying asset. Today, most of security tokens do not provide direct ownership, but rather contractual rights linked to the cash flows generated by the asset. Mt Pelerin can offer the complete tokenized version of existing financial instruments instead of creating proxies emulating them. Combined with a complete interface for token management as well as KYC/AML and fiat funds collection services, we are offering a unique one-stop shop for open finance.
What role does your Security Token play within the ecosystem you are building?
Because it was a practical and a historical demonstration of the power of tokenized fundraising, the role of the MPS token is to be a real-world success story that stimulates adoption by other companies. With it, they have a bulletproof model of tokenized equity that they can easily replicate to sell equity to the crowd and provide full shareholder rights as defined by law. This ability for a company of any size to raise funds directly from the public with a legally robust tool like equity is revolutionary, as it blurs the lines between private equity, venture capital and publicly listed companies.
Mt Pelerin is also planning to launch a secondary market in Switzerland. However, yet there is no exchange for Security Tokens live within the EU. Why is that and how is Mt Perlerin addressing this issue?
The reason why we still don’t see properly regulated security token exchanges yet is that guaranteeing the enforcement of compliance is a problematic that was underestimated by the tokenization community. They thought that applying compliance to a single security token through a whitelist would be enough to restrict token transfers based on KYC, but AML regulations are more complex than that. In most jurisdictions the transferability of a security is determined by the owner’s profile and economic context, and restrictions must be applied considering all his possessions over rolling periods of time. That’s why we have developed the BRIDGE, Mt Pelerin’s tokenization technology, as a cross-asset compliance tool that works on top of the blockchain layer. It enables the creation of security tokens as well as the definition of upgradable transferability restriction rules that can be attached to multiple tokens. A rules engine and its processor ensure a consolidated enforcement of these rules over multiples tokens and dimensions. With this approach, you can retrofit security tokens into the regulatory frameworks of multiple jurisdictions. We are convinced that this is the way to go, and that with it we will succeed in getting the relevant licenses to become the first regulated tokenized marketplace.
Which were the biggest challenges related to tokenization for Mt Pelerin so far and what are you upcoming ones to become a successful business long-term?
The main challenge was to find a way to enable the transfer of share-tokens without a written form, which is normally required by Swiss law. The solution was to formulate the transfer of a security token as a transfer of contract sui generis. In such a case, the written form for the transfer is not required if the transfer is allowed under the terms of the relevant contract or if all the parties of the contract participate in the transfer. The buyer of tokens during a token sale agrees to the tokenization and to the terms of transfer when purchasing the tokens. Subsequent buyers implicitly agree to these terms by purchasing tokens on the blockchain.
The future challenge will be mass adoption, and for that we are building up and developing all the elements required to make it happen. We are integrating in a single place, as a Swiss bank, full primary and secondary markets capabilities as well as custody, liquidity and payments designed in a way that anyone can use and understand.
Thank you for the Interview!
