Monaco: Fundraising through tokenisation explained by Grant Thornton
Fundraising through tokenisation of assets is a hot topic. The Principality of Monaco wants to become the world leader in ICO (Initial Coins Offering) and STO (Security Tokens Offering). The State has defined 3 main objectives linked to the tokenisation of assets:
- Attract new start-ups and activities
- Become the leader in environmental fundraising (CleanTech)
- Develop an alternative to a stock exchange via tokens
Extended Monaco‘s ambition is to attract companies and activities thanks to the development of new technologies, such as the blockchain, with the help of innovative means of financing. For its part, the State is financing a first ICO dedicated to the production of the new documentary film by Luc Jacquet, Oscar-winning director of The March of the Emperor. Like the Monegasque State, investors will be able to invest in green projects approved by the Principality.
Grant Thornton Monaco hosted a webinar on fundraising through tokenisation, which StartuppersClub attended, here the main information !
Regulatory aspects of fundraising through asset tokenisation in Monaco
Monaco has established a legal framework for the use of tokens and in order to become the leader in fundraising through asset tokenisation.
- Law 1482 of 17th December 2019 – Monegasque law n° 1.482 of 17th December 2019 for a digital Principality, introduced (among others) the notion of “token” and recognises its legal existence in Article 2 [Translated] : The token is “an intangible asset representing in digital format, one or more rights, goods or services, which may be issued, registered, kept or transferred by means of a digital recording device on a shared register and which, at the time of its issue or subscription, assumes the legal nature of the said right, good or service”.
- Law 1491 of 23rd June 2020 – The purpose of this law is to introduce, in Monegasque law, a legal framework relating to token offers (called ICO or STO). Token offering is a form of fund raising carried out by means of a digital recording device on a shared register, such as a blockchain, and giving rise to the issuance of tokens in return for the capital outlay made by investors.
- Order 8258 of 18 September 2020
2 types of token exist:
- The Utility token has for final purpose its use within the framework of a service. It can be spent but it is not a financial asset, just a kind of credit in an application. Issuing this type of token is called Initial Coin Offering (ICO).
- The Security token is a pure financial asset, the equivalent of shares in a company for example. The issue of this type of token is called Security Token Offering (STO).
Security aspects of fundraising through tokenisation in the Principality of Monaco
Digital assets must be secured before they are made available to subscribers. Law 1491 of 23 June 2020 details the conditions for raising funds by tokenisation in Monaco. The aim of the Principality is here to secure ICOs and STOs, which is not always the case in other jurisdictions. This should reassure investors and create quality investments. Producing the most secure token fundraising in the world is Monaco’s ultimate goal.
Article 2 of Law 1491: Administrative authorisation of the fundraising through tokenisation
[Translated] The realisation of a token offering is subject to prior administrative authorisation in the form of a label.
Article 3 of Law 1491: Registration in Monaco
The legal entity proposing an ICO or STO must be registered in Monaco and receive a label from the Principality.
Article 4 of Law 1491: Funds escrowed until the end of the fund raising process
The funds collected will be placed in an escrow account located in the Principality. The transferred funds can only be used when the project actually starts. If the fundraising is not fully completed, the funds will be blocked in a Monegasque bank.
Article 5 of Law 1491: A dedicated platform validated by the Monegasque authorities
The digital platforms will be validated by the Monegasque authorities. It will have to clearly identify the issuer and will retain full control over the tokens issued.
Creation of a secondary market: the virtual stock exchange in Monaco
A secondary market in Monaco would allow the sale of company shares in the form of tokens. In addition, it would facilitate the establishment of a kind of simplified stock exchange. It doesn’t exist at the moment, but the Blockchain technology combined with the tokenisation of assets could well make it possible!
This market would increase the liquidity of investments in Monaco. It would therefore be possible to hold tokens for projects validated by the Principality. However, some questions still remain to be answered as to how to enhance the value of these digital assets and tax the gains.
The startup Tokeny will help Monaco to develop its platform dedicated to the tokenisation of assets. The fintech is already specialised in the field of blockchain creation. According to Stanislas Colin-Benoit of the audit firm specialising in digital assets Cattalaxy, the Monegasque blockchain would gain in security as the platform is adopted by more and more people. Indeed, the security of a blockchain is determined in particular by the number of stakeholders.
Monaco’s approach is of course not speculative and the State will not invest in cryptocurrencies. The aim is really to develop a new economy around this blockchain technology.
Get help from Grant Thornton Monaco for your STO (Security Tokens Offering)
If you wish to carry out a fundraising campaign by tokenisation (STO) but the project seems complicated for you, Grant Thornton Monaco (Yohan Roudaut and Michael Mangano) and its partner Cattalaxy can help you with the key stages of your ICO/STO:
- Administrative steps to obtain the label
- Drafting of the “white paper”, the document that investors will read to understand the characteristics of the token (Art. 7 of Law 1491).
- Analysis of the compliance of internal procedures with the AML and KYC rules of Monaco
- Audit of the financial statements by a certified auditor, in particular for funds investing in tokens or foundations in cryptocurrencies.