Tokeny is the start-up that has not only been entrusted with protecting investors on Monaco’s digital platform, it also has the enormous responsibility of protecting the Principality’s reputation.
In June this year, the Monaco government signed a Memorandum of Understanding (MoU) with blockchain startup Tokeny Solutions, a Euronext backed FinTech based out of Luxembourg. It coincided with a dedicated Security Token Offering (STO) law voted in by the National Council just two weeks earlier. The aim: to create a safe and secure system of digital fundraising to support Environmental and Social Governance (ESG) projects that will be rubber stamped by the government. Tokeny will provide the solutions to secure the issuance and management of those digital assets on the blockchain infrastructure.
“The Prince’s government saw an opportunity for Monaco to take a leading role in how to provide a regulatory framework to leverage the blockchain technology for funding projects,” Daniel Coheur, co-founder of Tokeny, tells Monaco Life. “Only the best projects will qualify, and only a limited number will be granted the mandatory label. By giving its stamp of approval, Monaco will help a project gain visibility in an investment community. That is the commitment the government is taking in delivering this label.”
The first project seeking funding through Monaco’s blockchain-enabled platform is IceBreaker Studios for the production of its works with Oscar-winning documentary filmmaker Luc Jacquet (March of the Penguins). The company is looking to raise around €50 million through an initial security token offering, as well as the sale of additional tokens.
In other words, investors will receive digital tokens in exchange for their money. The more successful the project, the higher the value of these tokens. They can then be sold on the cryptocurrency market.
The new funding model allows IceBreaker to keep all rights and maximise the use of the material to distribute it across multiple channels, something which is virtually unheard of in film production.
“IceBreaker intends to leverage blockchain technology to facilitate the financing of meaningful content production while retaining all associated rights enabling new monetisation opportunities via films, exhibitions, etc,” said Luc Jacquet. “March of the Penguins and the subsequent Antarctica exhibition have demonstrated that the model can be a profitable one, making it appealing to investors while preserving the freedom to express my creativity and promote the virtuous value of the projects I carry.”
For social impact projects like IceBreaker to issue a token for fundraising, they will have to first be presented to the government of Monaco for assessment and approval. Between five and 15 ESG projects will be selected and rubber stamped by the government each year.
The token issuer will need to get a Monaco STO visa and set up as an entity in the Principality. This is all expected to generate around 100 new jobs each year.
While increasing employment opportunities within a two-square kilometre Principality is vitally important, the scheme will also be an opportunity for Monaco to prove that it can do compliant, on-chain finance and increase financial activity in the wealthy state.
“The government in Monaco wants to accelerate capital formation with this technology to reach a global audience of investors, but in order to do that it also needs to be able to give guarantees to those investors that the fundamentals of the project are good. The STO provides that,” explain Daniel. “Meanwhile, our ambition at Tokeny is to protect the reputation of Monaco and make sure that all those projects are in line with the strict rules and regulations. People are eager to see how this industry will transform, and they are looking to be reassured by the technology.”
Prospective security token holders being wooed in Monaco are qualified investors who will be expected to come up with a minimum investment of around €100,000.
Tokeny’s unique OnchainID enables stakeholders to securely and accurately identify themselves and their assets on the public blockchain. The rules are enforced through smart contracts which enable market participants to access high functioning tokenised securities, and the platform allows investors to recover their access as they please, guaranteeing the integrity of their assets.
“Tokeny’s system is based on Ethereum’s ERC-20 standard and the tokens are compatible with all Ethereum wallets,” says Daniel. “If projects want to market tokens to foreign investors, for example, they will have to comply with local rules.”
In July, cybersecurity firm Kaspersky confirmed the security of Tokeny Solutions’ smart contract protocol, the Token for Regulated EXchanges (T-REX).
The T-REX, a protocol implemented by a set of smart contracts, enables a ‘compliance-first’ approach through the whitelisting of digital identities and not the wallets of the investors.
“If the compliance criteria that we are enforcing can be hacked, then most investors wouldn’t buy it. So, we had a third party – Kaspersky – audit our smart contracts to confirm that there were no failures and that it is programmed in such a way that it will effectively enforce the rules and conditions, which is essential,” says Daniel.
Monaco is the first country in the world to introduce a dedicated STO law, and the world will be watching closely to see how this leap into digital finance plays out.
“People are naturally weary of the security tokenisation industry, so it is very courageous of the Principality, which is very careful with its reputation, to go in that direction,” concludes Daniel. “Once we share the first project and demonstrate that it is creating value and the technology protects against risk, then people will start to be comfortable and understand what it really means for the Principality.”
Daniel Coheur and Tokeny CEO Luc Felmpin have now established a subsidiary in Monaco and are hosted in the government’s incubator, MonacoTech.