October 16th 2018
Today, October 16th 2018, Mt Pelerin is proud to announce the world’s first company shares to be issued on blockchain and recognized as shares providing the same level of protection conferred by Swiss law.
Mt Pelerin is happy and proud to unveil today its brand new incorporation as Mt Pelerin Group SA in Geneva, Switzerland, and announce that the new company’s shares are, for the first time in history, issued digitally on blockchain in the form of tokens.
To understand the historical impact that this achievement will have on the blockchain space and the financial industry, we first need to take a moment to explain its main difference with the current state of security tokens around the world.
Until today, most blockchain projects have structured their token in a contractual way, simulating a share through a private contract between their company and each of their investors, without being an actual share. This approach raised many questions and uncertainties that we won’t address in more detail here.
In contrast, Mt Pelerin’s achievement today is our success in getting our tokens considered as shares. In other terms, owning one token simply equals owning one share of the company, which entitles the shareholder of all his rights protected by Swiss law, notably voting and dividend rights.
Owning one token simply equals owning one share of the company
It sounds rather simple, but if it hasn’t been done until today, there is a reason: it was everything but straightforward. In Switzerland like in most countries, the transfer of an asset must be endorsed in written form in order to be recognized by law. Obviously, this system isn’t very suitable for the trade of digital tokens. Having to sign and exchange papers defeats the very purpose of the blockchain and tokenization.
The background of this decision has two major aspects. The first one has been the publication of the legal opinions on the subject by Prof. Dr. iur. Hans Caspar von der Crone, one of the leading business law scholar in Switzerland. The second has been the fact that our holding company is the first underwriter of those tokenized shares, and does a blank endorsement for them. The goal is to prevent anybody in the future to challenge in front of a court the structure described above, as the holding company will always be able to endorse a share certificate on behalf of the real share owner identified by Mt Pelerin. Indeed, to be entitled to its shareholder rights, notably the right to vote in the company’s general assembly and the right to receive a dividend, a token holder will have to pass and complete our identity verification process (KYC), which can be completed remotely in a matter of minutes.
Why is this achievement a game-changer? Until today, an investor investing in a startup is locked with an illiquid asset, the startup shares. Usually, the main way for the investor to recover cash from the investment is to wait until the startup’s exit, which can take years. Today, with tokenized shares, the blockchain becomes a natural secondary market where they can be easily traded in any quantity to a wide range of buyers. Moreover, the existence of such a dynamic secondary market also gives the opportunity for a company and its investors to obtain an instant valuation straight from the market. In other words, tokenized shares enable investors to buy and sell almost instantaneously shares of a company without needing it to be listed on a traditional stock exchange, which is out of reach for most.
Tokenized shares enable investors to buy and sell almost instantaneously shares of a company without needing it to be listed on a traditional stock exchange
On the blockchain side of our achievement is the Mt Pelerin Bridge Protocol, which we have announced and published in open-source on August 28th. This protocol is today’s most advanced framework to issue any type of banking and financial instruments on blockchain in a fully compliant way, meaning solving two major problems most blockchain players struggled to address: the issuance of a security token and the management of its lifetime cycle.
The Bridge Protocol is capable to restrict the transferability of tokenized assets through an advanced rule engine directly built on-chain. This engine ensures the legal compliance of transfers in an extremely fine way. It is capable to distinguish different types of assets issued on-chain, and manage rules specific to each one of them.
Mt Pelerin is currently pushing the Bridge Protocol to become the de facto Swiss standard for the issuance of security token, notably in collaboration with the CMTA (Capital Markets and Technology Association), whose members include Swissquote, EPFL, Lenz & Staehelin, Temenos, and Mt Pelerin.
With this great announcement, we want to remind that Mt Pelerin’s ambition is to be inclusive. Indeed, we are open-sourcing most of our material: the Bridge Protocol, to which we want to connect established Swiss banks as well as qualified financial intermediaries in Switzerland officially allowed to do KYC in compliance with AML and CDB regulations, in order to enrich this new ecosystem. Moreover, Mt Pelerin will open-source its template documents related to the tokenization of shares.
In this way, we envision a new ecosystem for which we provide all the tools it needs to thrive. We want to help any company to get a head start and benefit from the enormous potential of tokenized shares without having to go through the long and costly road that we took to write history.