New channels for document exchange

The blockchain facilitates the transfer of official documents in a very smooth way. It offers very clear solutions to notaries and independent managers when these official documents relate to the assets of their clients.

Often cited in recent years as the paragon of professions endangered by blockchain, notaries are in fact far from being threatened. Blockchain technology offers them solutions to which the profession had no access until now. A pioneer in digital technology, the Paris Chamber of Notaries has been investing in digital technologies and solutions for many years. It has even set up an innovation fund with more than 6 million euros in outstandings in 2019. With this envelope, it can carry out innovative and structuring projects capable of developing the notary’s profession in relation to new technologies.


As defined, its objectives are to enable notaries to gain autonomy, develop new offers and thus increase their added value in the eyes of clients, all while achieving productivity gains.
It is therefore not surprising that one of their first projects, funded and implemented, is to use blockchain technology to track financial securities through a shared electronic recording device. Satisfied with the success of this first trial, The Paris Chamber of Notaries has presented an even more ambitious project at the Technot trade fair in June 2021: to create a register of authentic instruments on the blockchain.


This is an inspiration for the Swiss market, which has an equal need to digitalise its notarial activities. Sending an authentic instrument to the cantonal tax authorities, to take a very simple example, is currently done by a physical courier. This is a costly and inefficient process in a society that is digitising at every turn. The digitalisation imposed by the confinements has also had an impact on the Swiss notary’s office. Between remote powers of attorney and videoconferences with clients, notaries have used new methods to adapt to the Covid crisis and continue their activities as best they can.


Blockchain provides more than just answers. It offers numerous guarantees thanks to end-to-end encryption of information, decentralisation of data ownership and verification of each transaction at any time, without the possibility of manipulation. Thus all data can be exchanged directly with the official registers, without transferring documents or even digitising processes. These initiatives, of which the canton of Geneva is at the forefront with the Chamber of Notaries of Geneva, demonstrate the concrete potential of the blockchain. The digitisation of the exchange of authentic instruments between public institutions and notaries could therefore widen the field of possibilities, and open up opportunities for independent managers.


The digitisation of birth certificates, marriage certificates and wills may be of particular relevance to financial institutions, for example, as may the digitisation of building rights and real estate deeds.

 

“The digitalisation of the exchange of authentic acts between public institutions and notaries could therefore widen the field of possibilities and open up opportunities for independent managers.”

 

The digitisation of wills and the creation of a digital infrastructure giving managers access to their clients’ inheritance information would perpetuate the relationship with the heirs in the same way. This is also the case with events related to the birth of future beneficiaries, marriage or any other official event where access to information is often complex. The existence of a qualified data source would greatly facilitate the structuring of the various heritages.


By going digital, and using technologies such as blockchain, notaries are integrating a new form of financial infrastructure, purely digital, which facilitates interactions between key players who are otherwise used to working together. Such an infrastructure, if built on technologies such as blockchain, will lead to more trust between the various stakeholders. For in this famous trust, which is specific to digital technology, lies an indispensable link in the financial centre of the future.


The electronic signature and remote identification of persons, which are still not widely used, as well as the almost non-existent digital authentic act, are therefore not far off. The potential for the digitalisation of notaries through technologies such as blockchain is immense. And the interest for the financial sector is all the more obvious.

A new standard for managing compliance

With blockchain technology, it is possible to streamline the cumbersome procedures associated with the compliance function. In this respect, relations between independent managers and custodian banks will be easier to formalise.

Compliance, historically a complex issue in the financial ecosystem, has taken a new turn in recent years. Regulations are getting tougher, and players are under increasing pressure from regulators around the world.
In the United States, the Risk Management Association conducted a survey of US banks on this subject. Half of them reported spending between 6 and 10% of their revenues on compliance costs, while 20% spent nearly 5%. These high costs have a direct impact: less flexibility in product design (25% of respondents) and higher costs for certain services (22%).


More generally, again in the US, the National Association of Manufacturers (NAM) estimates compliance costs at around USD 10,000 per employee. Global custodian banks and brokers with several thousand or even tens of thousands of employees could spend more than 200 million per year on compliance.
With the LSFin and LEFin laws coming into force on 1 January 2020, it goes without saying that Switzerland will not be spared the regulatory burden. Banks, like independent asset managers, have to adapt to a more extensive and complex legal framework.


Almost two years have elapsed since the entry into force of the FINMA, i.e. just over half of the three years allotted to asset managers and trustees to obtain the authorisation required by the Finma. Unsurprisingly, the 2,403 asset managers and trustees who have registered with the Swiss financial market regulator have progressed at different rates. Only 284 managers, or 12%, targeted 2020 for authorisation. 684, or almost a third, were targeting 2021, and 1,434, or almost two-thirds, were targeting 2022.
Applying for membership of a supervisory body or for Finma authorisation is a cumbersome administrative task. The preliminary work involved is even more so.


Compliance is therefore a subject that has gained considerable momentum over the last few years. It is often seen as a burden, but it is also time-consuming, taking time away from the core business of IFMs and the day-to-day running of their businesses. The entire sector is now calling for solutions that can be implemented quickly.

“But beyond the technology, the real issue here is the harmonisation of market standards.”

Digital technologies offer a maturity and a degree of security that perfectly meet the requirements of compliance. But beyond the technology, the real challenge lies in the harmonisation of market standards. This is only possible by aligning the various financial players around a common governance and around common tools.


Governance is a key element here, as it is the basis for the choice of technology. A standard cannot depend on a single entity.


If there is harmonisation, it must be able to be decentralised. For a standard to have credibility, it must be the result of genuine collaborative work, and its authorship must not come from a single entity, but from a group of leading structures representing the entire financial sector. In this sense, the work done by the Blockchain Association for Finance in close cooperation with the Wecan group illustrates the logic of this approach. The need for decentralisation therefore highlights the importance of technical choices. The implementation of traditional, centralised databases would counteract this process of governance and harmonisation. As decentralisation is now technically possible thanks to technologies such as blockchain, the definition of a standard and its implementation through decentralised databases become possible. The essential coordination between actors is therefore no longer a wish, but a reality.


The aim is to harmonise standards which, together with highly secure technologies such as blockchain, will ease the burden of the compliance function. Switzerland, which is used to innovating in the financial sector, has the opportunity to be a pioneer in this field.

Tokenisation opens up new markets

By leveraging blockchain technology, tokenisation is changing the face of certain asset classes and providing investors with opportunities that they may not have access to today, such as art and real estate. Financial structuring and legal assistance also add to the benefits.

 

In an article published in June, the Word Economic Forum argued that blockchain technology, along with the crypto economy, could lead to the development of a much more inclusive financial and technological infrastructure. Technology has long been an indispensable partner of the financial sector. Many fintechs are offering innovative services, with increasingly digital approaches.


The Covid crisis has helped several of them to stand out. This is true of Twint, which recorded an influx of new users of up to 7,000 per day during the lockdown.


The digitalisation of financial services and flows is accelerating and investments are naturally following the trend. This is particularly true of alternative investments, which are increasingly turning to tokenisation via blockchain. Although the technology has been ready for some years, the market has been waiting for the right moment. 

The democratisation and media coverage of blockchain since the beginning of the year have opened up new prospects for promoters of these investments.

The share of tokenisation in the exchange of property titles, particularly in real estate, is likely to increase drastically over the next few years.
In itself, a token is nothing more than the digital representation of an underlying asset.


Even if technology is a key factor in the tokenisation process, the real challenge lies in the financial structuring and in compliance with the broader financial legal framework. It is therefore important to identify which part of the current regulation can already be used – transfer of securities, transfer of financial assets – and which part of the regulation is specific to the use of digital securities or tokens.

The onboarding of investors through a fast and efficient KYC is a key factor in this type of operation, as is also offering custody solutions once the transaction has been completed and validated.
Tokenisation is therefore not just about offering access to a simple platform where tokens can be exchanged, but about a complete process, from financial structuring to custody and the technical creation of the token. Such an approach requires cross-disciplinary expertise, both on the technological side, as well as on the real estate development side in the context of the tokenisation of a property, and in the approach to asset management from a financial and legal point of view.


Recently, new models of fundraising have also emerged thanks to the innovations brought about by DeFi, an acronym for Decentralized Finance. Amongst these models, many projects The digitalisation of financial services and flows is accelerating and investments are naturally following this trend. IDOs are increasingly used as a tool to raise funds in a completely decentralised way.


Decentralised Exchanges (DEX) are innovative in their ability to provide a trading venue for digital assets. These markets operate through Automated Market Maker (AMM) smart contracts, which take the form of bilateral liquidity pools.


The price of a given pair of digital tokens is determined by the ratio of asset reserves that are deposited in the vaults by market makers called LPs, as in private equity. In this framework, anyone can act as a market maker for a given pair by depositing appropriate reserves.


As a result of this process, LPs earn passive income indefinitely through market-generated trading fees based on the percentage of their contribution to the pool, until liquidity is subsequently withdrawn.
The best known decentralised exchange is Uniswap. It has been growing rapidly since the beginning of 2021, and has over USD 10 billion in weekly transactions. The advent of such a platform therefore reinforces the interest in tokenisation by offering access to liquid secondary markets. With investment opportunities set to become increasingly diversified.

“The digitalisation of financial services and flows is accelerating and investments are naturally following the trend.”

Real estate tokenisation, a fund manager’s perspective

Interview with Mathieu Saint-Cyr

For this series of interviews, five experts propose to demystify tokenisation in their field of expertise: from the point of view of the real estate developer, the independent manager, the bank and the auditor.

For this second interview, Mathieu Saint-Cyr, Head of Asset Management and Fintech Solutions at Geneva Management Group, brings us his perspective on real estate tokenisation as a fund manager. In addition to his role at GMG, Mathieu is Chairman of the Board of Wecan Tokenize, an innovative digital asset platform, and co-founder of the Geneva Fintech Association.

He was previously Head of Trading at MKS, a leading precious metals trading and refining company. Prior to this position, Mathieu headed BNP Paribas’ global gold derivatives trading business. He holds two MSc degrees in fundamental and financial mathematics.

How do you think technology is improving the financial sector?

I think technology is an integral part of the financial sector, whether it’s in the management of clients with onboarding, in the investments they make, but also in the controls that need to be put in place around those investments. Technology, and in particular the technology around tokenisation, responds to these three phases of investment management.

At the level of onboarding, we create digital profiles for clients, which makes these processes much easier, faster and more efficient, and therefore more pleasant for the client. At the investment level, this allows the client or investor to better understand his investments, to better follow them and to monitor them in real time. But also, if necessary, to create a certain liquidity, i.e. to be able to resell shares in assets that they have bought.

And finally, in terms of control, which is an extremely important point in the financial system in general. And of course the standardisation of control methods via technology. For example, in the context of tokenisation, this makes it possible to have a circulation of assets and investments that is regulated.

What advice would you give to fund managers who want to offer tokenised assets to their clients?

Perhaps two pieces of advice. The first is to get closer to players who have been active in tokenisation, players who have a track record, who have proved that they have mastered this technology and that they can also deliver concrete and usable solutions for investors and for the people who work with these investors. It is therefore very important to have a regulated framework, to understand the regulations in force in the country in which the manager is located, but also the country in which the investors are located, which are not necessarily the same. The rules differ from country to country and it is very important to understand this in order to propose a framework that protects the investor and respects the legislation in force in the country where one operates.

What is the investment process?

Ultimately the token and the way it is offered, particularly in the context of Wecan Tokenize, is nothing more than a digital representation of a title to an asset. It is a way to access an investment. You have to make sure that this means is equivalent to a traditional title deed, for example a paper title deed such as a contract that you have signed at the notary’s office.

Once you have that digital title, the processes are the classic ones which are onboarding as a customer, that is KYC – saying who you are, showing proof of identity – creating the investment via payment and buying its tokens, and then you are in a financial market in the same way as you would be if you were buying shares, fund units, or other financial instruments and you can trade those financial securities in a completely equivalent way.

What is the legal framework for this financial structuring?

The legal framework is a financial legal framework in the broad sense, i.e. we have to comply with the regulations in the country where we are located. In Switzerland it is the regulation as proposed by the FINMA, if you are in Luxembourg it is the regulation as issued by the CSSF. It’s very important to understand which part of the current regulation you can already use, i.e. the transfer of securities, the transfer of financial assets and which part of the regulation is specific to the use of digital securities or tokens.

As far as Switzerland is concerned, I think we have a great advantage because the regulator made its decision very early on, several years ago now, and in any case well ahead of the regulators in European countries or other countries in the world. So the framework was proposed in two stages. Firstly, a framework that we call the “sandbox”, i.e. we are trying to set up the first transactions and the first projects, and then the law that is being implemented, and in particular this year that is being implemented, as for the rest of the financial assets, and which specifies the cases of application and the cases of use of these tokens.

What are the risks of investing in real estate via tokenisation?

I think it is very important to understand that tokenisation is only a means of accessing a financial product, which in this case is a real estate asset, but one could very well imagine tokenising a share of a fund – which has already been done – or other types of financial assets such as shares or bonds.

The risks inherent in investing in tokenisation are ultimately the same as the risks of investing in the underlying or final asset in which one invests. One should not think that since one is tokenising there is no longer any real estate risk. The first risk is the real estate risk when you invest in real estate. In addition, there are certain risks, in particular a regulatory risk: you have to make sure that the token you buy, and if necessary resell, is issued by an issuer that is regulated in the country in which you are located and that is regulated in the country in which the client is located. So there is a slightly increased regulatory risk.

And finally, there is an exchange risk that is different from that for traditional financial securities, since tokens are generally exchanged on marketplaces that are perhaps less regulated, or in any case with players who have less experience. This is why we strongly advocate the use of tokenisation in the context of partnerships with entities that are very well known. For example, in Switzerland we have an initiative with the SDX exchange, which is the digital exchange of the SIX exchange, which is the national exchange, and in this framework this risk is greatly reduced.

What have been the challenges and obstacles to using a cutting-edge technology?

Finally, I think that tokenisation is no longer as avant-garde as it was in the past. It is becoming much more mainstream and we are seeing in particular that blockchain technology, which has been much talked about through crypto-currencies over the last few years, is finally spreading to a much broader set of applications. Today, via our sister company, Wecan Comply, we have succeeded in creating a lot of interest in the technology on the part of leading financial players, be they banks, external asset managers or private managers, to work together on a common platform based on blockchain technology.

Tokenisation uses the same technology and is based on the exchange of property titles of assets that already exist in the market and that can be freely exchanged, in this case either real estate, real estate shares or real estate fund shares.

So the challenges we face are ultimately challenges of adoption, of use by the client or the end investor of the technology, and regulatory challenges with regulations that are being put in place very quickly, particularly in Switzerland, but which have not existed for 10, 20, 30 or 50 years. So there is necessarily work to be done to understand the nuances of using the regulations for the exchange of tokens. And finally I would say that there is also a challenge in terms of reputation and education.

It’s very important to understand that someone who invests in a real estate token, again that is, they own a digital title to a real estate asset, is not at all an investor who invests in, say, crypto-currencies or Bitcoin. Making the nuance and differentiation between these different assets in the blockchain sphere is also a challenge and this is where players like Wecan Tokenize or Wecan Comply have a very important role to play, in educating, simplifying and explaining the different ways to use the technology.

How do you see investment via tokenisation in the coming years?

My view, and the view of Wecan Tokenize, and by extension our sister company Wecan Comply, and all the discussions we’ve had with financial players on this issue, is that the share of tokenisation in the exchange of property titles, particularly in real estate, is going to grow drastically over the next few years. We’ve seen a few pilot projects over the last two or three years and then larger projects over the last few months.

The Wecan Tokenize project, for example, has succeeded in raising almost fifteen million dollars of investment in tokens for real estate projects. We are now seeing a much more widespread adoption by institutional clients, whether they are very large asset managers, which are our clients, or banks, or smaller companies, which are also trying to benefit from the advantages of this technology to offer more services to their clients.

All of these players are increasingly using this technology to bring in a wider range of investors, ways of investing smaller amounts of money in projects that until now have generally been reserved for professional or institutional investors.

Where do the leaders in real estate development and asset management stand?

I think that in this sector of activity the leading companies, or at least the pioneering companies that are keen to develop the use of technology, have moved from a phase of discovery, understanding and study of the issue to a phase of setting up many pilot projects. The latter have very practical and pragmatic aims for clients who already have problems they are trying to solve with tokenisation, but also with other methodologies, securitisation, exchange of fund shares, funds that are not necessarily listed, between entities that generally do not exchange their shares.

I am thinking for example of foundations on the Swiss market. So there is a whole range of projects, which are very practical projects where tokenisation is used, perhaps not yet for the greatest number, perhaps not yet for investment amounts of a few euros, but in any case we are a long way from the projects of a few years ago when we were really limited to “proof of concept” without really practical applications. Today I would say that it is very practical, very pragmatic and increasingly widespread, especially among players with very diverse profiles.

Blockchain: driving the growing Regtech sector

Blockchain chronicle. The regtech sector, which uses technology to improve compliance for banks and financial players, is booming.

A simple Google search of the term “fintech” results in over 80 million hits. While this neologism of finance and technology has been in the financial glossary for many years, few would imagine that it is older than the internet.

The first use of the word fintech dates back almost 50 years, to 1972 in the pages of the business magazine Interfaces. Abraham Leon Bettinger, vice-president of the American bank Manufacturers Hanover Trust Company, wrote an article entitled “Fintech: a series of 40 timeshare models used at Manufacturers Hanover Trust Company”. Of course, it was not until the 2000s and the rise of financial startups that the term was democratised, and more particularly in 2015 according to KPMG, the year in which more than $47 billion was raised in this sector, which is now a must.

More recent and less well known than its big brother, the word regtech (3 million Google hits against 80 million for fintech) is gaining momentum this year. This neologism designating fintechs specialising in solutions using data in compliance with new legal requirements is expanding.

The Regtech study conducted by Sia Partners and AEC Fintech1 in 2018 on 80 European regtechs stated that 86% of them were created after 2008. More recently, in June 2021, Deloitte2 examined the issue through a listing of nearly 440 companies active in the field. According to the latter, 181 are active in compliance, 91 in identity management and control, 72 in reporting, 59 in risk management and only 36 in transaction monitoring. The technologies used are in the order of seven with APIs (Application Program Interface), Big Data, Blockchain, cloud computing, robotics, smart contracts and voice or text recognition technologies.

Blockchain-based regtech solutions offer an effective tool for companies in their efforts to comply with tax regulations, for example.


Among these, one technology in particular is driving the sector: blockchain. Blockchain-based regtech solutions offer an effective tool for companies in their efforts to comply with tax regulations, for example. The immutable nature of this technology ensures the accuracy of these records, allowing it to be used as a supporting document for returns filed by organisations with the relevant tax authorities.

This technological innovation will continue to grow as regulations evolve and regulatory expectations increase. Blockchain addresses critical issues for financial institutions, which are forced to comply with complex anti-money laundering and KYC regulations. As the banking sector has been particularly impacted by these changes in recent years, the relevance of blockchain as a core technology in regtechs is increasing.

In Switzerland, several startups have developed regtech solutions based on blockchain. For example, Zurich-based Indagia is developing a software solution that uses machine learning as well as blockchain to enable financial auditors and accountants to work more efficiently by capturing all data from receipts and invoices and automatically processing them for accounting.

Another example is Wecan Group and its Wecan Comply solutions for custodian banks and independent asset managers, or Wecan Act, a collaboration between public institutions and cantonal notary chambers. This solution enables the exchange of data between notaries and public registries. Both software packages are also built on the blockchain in order to guarantee the immutability, traceability and time-stamping of data.

The regtech field is gaining momentum that has not gone unnoticed by investors.

Regtech is also gaining momentum in the field of crypto-currencies. Companies like Chainalysis, Coinfirm or KYC-Chain provide anti-money laundering software for bitcoin transactions by offering enhanced due diligence.

Another example is the Danish regtech NewBanking, which aims to enrich traditional payments on all major card schemes with KYC data and compliance information, again using blockchain.

The field of regtechs is gaining momentum that has not gone unnoticed by investors. KPMG confirms this trend. During 2020, interest in regtech solutions has exploded. Companies are striving to rapidly digitise their processes to support growing consumer demand. As a result, companies have been looking for efficient and cost-effective ways to manage the regulatory requirements for digitising their data.

This growing interest has driven funding in regtechs to US$10.6 billion for the year 2020, almost 10 times more than in 2017 when the entire market received US$1.5 billion in funding.

We might imagine that this exponential growth only reflects a growing number of investments in the sector. This is only partially true. In 2017, VC, PE and M&A investments totalling US$1.5 billion corresponded to 146 deals. In 2020, the US$10.6 billion corresponded to 191 deals. The profitability, maturity and potential of these startups is drastically increasing the valuation of the sector, to the satisfaction of early investors in Serie A and B.

Roper Technologies’ acquisition of insurance compliance software company Vertafore for US$5.3 billion in September 2020 highlights the growing importance placed on regtechs by strategic investors, as well as the increasing maturity of companies in the sector. As financial regulations increase, regtechs have many more years to go.

Investing in blockchain companies in 2021

Blockchain chronicle. What is the current potential of this technology? What is the state of VC investment in blockchain?

“Information technology has changed the way people create economic value. This famous quote from Alan Greenspan now seems to extend to blockchain as well. Generating renewed interest since the beginning of the year, the technology behind Bitcoin or Ethereum has become a media sensation. It has taken root in the financial world, going beyond the simple framework of crypto-currencies. Understanding its potential, its limits and the broad guidelines defining its characteristics is now an undeniable asset in the range of skills and services of asset managers.

Definitions often suffer from their complexity. Explanation usually precedes example. Nothing speaks louder than examples of use to help conceptualise the potential of blockchain. In itself, the definition of blockchain can be limited to a succinct popularisation:

Blockchain is a digital technology that allows the recording of information that can be very varied: the identity of the owner of an asset, the history of a transaction, the value of an asset, the timestamp of a share, the status of a transaction,…

Several industries have significantly accelerated their implementation of blockchain solutions and infrastructure over the past 18 months.

This information is encrypted and then stored in a distributed ledger (Distributed Ledger Technology) in an immutable manner. This ledger, like a book of accounts, allows a complete and unalterable history of data movements to be kept and thus offers those who can read it full traceability.

Depending on the underlying technology chosen, this register can be completely decentralised. Decentralisation allows several actors to share ownership of the registry, each maintaining a copy through what is called a node. These nodes constantly communicate with each other and, through a consensus process, synchronise their internal copies and new information to converge into a single authoritative version.

Once data is recorded, encrypted and validated in the blockchain, it cannot be changed. For example, the value of a Bitcoin on 3 March 2018 is immutably recorded in the Bitcoin blockchain. Each node can thus cryptographically verify that what it sees in its internal copy corresponds to what the other nodes also see in their copy, without any intermediary or third party.

Several industries have significantly accelerated their implementation of blockchain solutions and infrastructure over the past 18 months. This is the case of A.P. Møller Maersk with its TradeLens solution co-developed with IBM, which has become the benchmark in freight and maritime trade. The Danish shipowner’s competitors such as MSC and CMA CGM have recently announced that they are joining its blockchain platform for sharing container transport information. Building on this, Al-Hamd International Container Terminal (AICT), one of Karachi’s largest container terminals, has become the first depot operator in Pakistan to join TradeLens to manage the digital logistics of its containers.

Blockchain-based solutions are also increasingly being commercialised in the banking and asset securitisation sectors. On 26 July 2021, J.P. Morgan reportedly opened up access to crypto funds to all its wealth management clients. According to a Business Insider report citing an internal memo, the bank’s wealth clients have been granted access to five crypto products since 19 July, four from Grayscale Investments and the last from Osprey Funds.

The banking world’s interest in blockchain technology goes beyond that of cryptocurrency.

The announcement comes just a week after the Financial Times reported that BNY Mellon had joined a crypto consortium of State Street and six other banks. This consortium of two of the world’s largest custodian banks is said to be supporting the London-based cryptocurrency trading platform Pure Digital. This inclusion in the blockchain world assumes direct demand from their clients, many of whom are large asset managers.

But the banking world’s interest in blockchain technology goes beyond that of cryptocurrency alone. The recent partnership between Oracle Financial Services Software and financial technology provider Everest is proof of this. As a result of this partnership, Oracle’s retail and corporate banking customers will be able to verify a customer’s credentials when creating an account using blockchain architecture.

As a result of this interest, Mastercard has launched several blockchain-related projects and initiatives. The most recent, in early August 2021, is the opening of its Start Path programme to blockchain-enabled businesses. This announcement by Mastercard also echoes the one made a week earlier. The US giant announced an alliance with Circle, Paxos, Bitpay and Uphold, all of which are active in blockchain, to integrate more features into its card programme.

A Goldman Sachs study reported by Bloomberg8 of 150 family offices around the world also shows the growing interest of UHNWIs in blockchain investments. 15% of them confirm that they have already invested in cryptocurrencies, while 45% say they are interested in doing so as a hedge against “higher inflation, prolonged low rates and other macroeconomic developments after a year of unprecedented global monetary and fiscal stimulus.”

Investing in blockchain startups and projects is thus becoming increasingly common. According to a Bloomberg report compiling data from CB Insights and picked up by Cointelegraph 129 blockchain startups received about $2.6 billion in funding in the first quarter of 2021. This figure already surpasses the total funding over the whole of 2020 for all blockchain startups by $300 million.

Energy use and sometimes high transaction costs limit the implementation of solutions.

With a new generation of out-of-the-box investors entering the alternative finance markets, these numbers are likely to increase in the coming years as well.

In the face of this enthusiasm from institutions and players in various industries, blockchain still faces some limitations. Energy use, the Achilles heel of many blockchains like Bitcoin, and transaction costs that are sometimes too high for public use during peak periods (e.g. Ethereum) limit the implementation of solutions. The lack of appropriate regulations is also a heavy sword of Damocles hanging over the promises of certain projects.

Several players are trying to make a breakthrough with their own answers. This is the case of Ethereum with its new EIP-1559 update, better known as Hard Fork London, promising a massive reduction in transaction costs, and which has been generating controversy and expectations for a few days. But the answers are still lacking, and the well-known problems of energy consumption or transaction costs are not yet solved.

The potential of blockchain is therefore growing, and projects that take into account the current limitations and focus on concrete and truly operational solutions are the ones that are now attracting attention. Several startups based on the pragmatism of the reality on the ground rather than on often unrealistic dreams and visions are leading the way, attracting investment, customers and talent with their operational blockchain-based products.

This is the case of FireBlocks, a platform that allows banks to store cryptocurrencies and that has just raised 310 million dollars, bringing its valuation to 2 billion. Another example is Swiss bank Sygnum, which tokenised a Picasso painting with the company Artemundi, or Wecan Group with its compliance solution Wecan Comply, which recently announced Julius Baer and Bank Syz as new users.

If there is one thing that is certain, it is that Alan Greenspan’s quote has never been more relevant.

 

Finance and technology: Bank Julius Baer joins Wecan Comply, a pioneering compliance platform

The solution will enable the leading Swiss wealth management group with a dedicated intermediaries business to simplify the exchange of information with its independent asset managers in Switzerland and to receive compliance documents in an ultra-secure manner. This solution is developed by the Swiss fintech Wecan Group, a recognized expert in blockchain technologies.

Switzerland as a key player in the construction of the best regulatory standards

Bank Julius Baer joins Wecan Comply, the world’s first blockchain-based compliance platform for private banks and external asset managers. Wecan Comply is built like a digital vault. The platform runs on a simple web browser and only requires access to the Internet.

As a private bank with a strong entrepreneurial spirit, we are committed to empowering the success of our clients and partners through innovative solutions. We can unequivocally identify with the vision of Wecan Comply and are excited to join the growing community to create value for our intermediary partners in Switzerland, facilitating efficiency gains via pioneering co-creation.

Michel Yigit
Head Intermediaries German-speaking Switzerland

With the entry into force of the FinIA and FinSA laws on January 1, 2020, external asset managers and trustees are no longer supervised by banks, but also by supervisory bodies. The procedures for identifying, controlling and monitoring client relationships are becoming increasingly complex. Measures must be put in place to avoid the increasingly time-consuming duplication of the same tasks.

The result of two years of collaboration between a panel of major financial players, Wecan Comply has been built to best address the compliance challenges of today and tomorrow. The swiss-made solution meets two expectations: to prevent compliance and administrative work from overwhelming the day-to-day activities of asset managers, and to ensure that specific tasks are carried out correctly and reliably, while complying with new regulations.

With the arrival of Julius Baer, Wecan Comply confirms its national presence in both the German and French-speaking parts of Switzerland.

“The collaboration with Bank Julius Baer is a demonstration that Wecan Comply is the gold standard, for the industry, to pool resources and guarantee the best compliance requirements. It is a great pride for Wecan Group and we are pleased that the bank also joins the Board of the Blockchain Association for Finance, which governs the development of Wecan Comply.”

Vincent Pignon, Founder and CEO Wecan Group

Banque Syz joins Wecan comply, the pioneering blockchain platform dedicated to compliance

Banque Syz is pleased to announce that it joined Wecan Comply today, the first global compliance services platform dedicated to private banks and independent asset managers based on blockchain technology. Syz thus joins other major banks of the Swiss financial services industry that already use this platform.

 

This platform has been developed by the Swiss fintech group, Wecan, a recognised expert in blockchain technologies. This highly secure solution aims to simplify the exchange of information with independent asset managers.

“Looking ahead to the future is in our DNA. We built our business on listening to clients, delivering great service and the notion of personalised service”, says Yvan Gaillard, CEO of Banque Syz. “Our independent asset managers have had to deal with changes to the regulatory landscape, which are ever more complex, notably with the LSFin and LEFin Acts that came into force on 1 January 2020, and the increasing amount of requirements in their activities. We are therefore delighted to be able to give them access to an innovative platform that simplifies the compliance process for them”.

After working with a broad range of financial players for over a year, Wecan Comply was created to address the needs of private banks and independent asset managers in the best possible way. The solution enables them to achieve noticeable economies of scale with regards to their compliance procedures.

Built as a smart digital vault, Wecan Comply enables banks and asset managers to store and access data that is necessary for the performance of the compliance function in a highly secure manner using blockchain technology.

As Banque Syz joins the Wecan platform, Switzerland yet again confirms it is a pioneer in the use of blockchain technologies.

“We believe that Wecan Comply represents new opportunities for banks and external Asset managers,” says Vincent Pignon, Founder & CEO of Wecan Group. “The application of blockchain technology has the potential to transform the way to manage compliance with simpler procedures, greater security and the possibility to carry out audits in real time. Wecan Comply is leading the field in blockchain technology and Syz is the bank for the future. By joining forces, we can help external asset managers to bridge the gap between traditional and digital compliance”.

Click on links below to read this article.

In French:

https://www.allnews.ch/content/corporate/banque-syz-rejoint-wecan-comply

https://agefi.com/actualites/entreprises/banque-syz-rejoint-la-plateforme-blockchain-wecan-comply

In English:

https://www.institutionalassetmanager.co.uk/2021/06/21/302154/banque-syz-joins-wecan-comply-platform

https://citywire.ch/news/syz-bank-joins-platform-for-eams-and-banks-data-exchange/a1521514

In German:

https://www.finews.ch/news/banken/46734-banque-syz-wecan-comply-blockchain

 

“Create a more efficient working environment”

Interview with Laurent Pellet, Member of the Board of Directors of the Blockchain Association for Finance, Global Head of GFE, Banque Lombard Odier

By Jérôme Sicard – Photos: Karine Bauzin

On the initiative of Lombard Odier, Pictet and Edmond de Rothschild (Switzerland), the Blockchain Association for Finance was created. It aims to govern the working relationships between banks and external managers present on the blockchain platform developed by Wecan. This platform was designed to facilitate administrative exchanges between banks and asset managers. Having defined the standards and governance rules, the Association now intends to guarantee its durability. Laurent Pellet, a member of the board of directors, explains.

What is the Blockchain Association for Finance?

Laurent Pellet: It is a non-profit association whose main objective is to govern the relationships that will develop between the blockchain platform developed by the WeCan Group in Geneva and its users, namely external asset managers and custodian banks. Let’s take a quick look at this platform. By exploiting blockchain technology, it aims to facilitate the exchange of information and data sharing between banks and external asset managers. On the one hand, managers simplify the compliance procedures with their custodian banks. On the other hand, the banks get better quality data, while reducing the time invested in collecting it.
From this point on, it was important to create an association that ensures that the platform is always in line with the needs of its users. Furthermore, we also felt it was necessary for this association to be able to play a driving role in the future development of the platform, depending on regulatory changes.

What were the reasons for its creation?

First of all, there was a common desire among custodian banks and external managers to create a more efficient working environment thanks to technological innovations like Wecan. There was also, as far as the banks were concerned, a desire to forget the fact that we were competitors in order to develop new solutions together, based on digital technology, in the obvious interest of the Swiss financial centre. We were all ready to work and move forward together, especially as we were all attracted by Wecan’s proposal. However, once we were involved in the project, we were keen to ensure that the relationship between the platform and its users was perfectly defined. We had to be sure that it would last and that we would have final control.

What is the nature of the relationship between the association and Wecan?

We agreed on a Service Level Agreement between the association and the Wecan Group, the main aim of which is to guarantee the continuity of the platform. For example, the association has ensured that it will be able to recover the source codes in the event that the Wecan Group is no longer able to manage the platform or to continue its development. The Association is chaired by Stéphanie Hodara, a well-known legal expert.

Can the association make money from the growth of the platform?

This is not the way we work. The aim of the association is not to make money from Wecan’s work in bringing the technology. On the contrary, we are delighted to be able to contribute to the success of a Swiss fintech with very good potential. For the association and its users, banks or external managers, the gains will be generated elsewhere. For the association, and for the Swiss financial centre more generally, there will be a premium for innovation. For the banks and external asset managers, there will be new ways of working together that will benefit everyone.

How is the association financed?

Banks pay a membership fee. External managers do not. We really want to gather as many people as possible around this great project.

How many external managers have you gathered so far?

More than fifty.

How is it that this project is the first to bring together so many banks in Switzerland?

That’s a difficult question. I would say that it is the combination of several factors. The first trigger was the entry into force of the new laws that now regulate the activity of external asset managers. With the LSFin and LEFin, there is much greater recognition of this profession, which now has a framework within which it can evolve much more easily.
When Wecan approached us at the very beginning, the outlines of the project were still quite limited. They limited themselves to the exchange of documentation. There were three banks around the table: Lombard Odier, Pictet and Rothschild. We very quickly realised that we could go further, to the point of completely digitalising the process of onboarding managers, with all the compliance aspects that go with it. As we were three major players who initiated this project, we thought that we would not have too much trouble motivating others.

What is the most important unifying element for you?

The definition of standards! From the outset, we were convinced that we needed standards that could be accepted and used by everyone, both custodian banks and external managers. This seemed to us to be an essential point. We worked for several months on formalising these standards by bringing together banks and managers around the table and ensuring that everyone’s needs were taken into account. Today, these standards are validated. Insofar as the interests of all parties were perfectly aligned, we moved forward fairly quickly.

How do external managers find their way around today when they join the platform?

Clearly, the aim is to lighten their workload by automating compliance checks in a perfectly secure environment. Today, thanks to the platform, information exchanges and document sharing are managed from a single data set that the manager uploads to the platform and then gives access to the partners of his choice. He no longer has to repeat the same manual operations each time. Ultimately, with the digitalisation of these time-consuming administrative formalities, he will be able to free up more time to focus on his core business, namely portfolio management and client relations.

And for Lombard Odier, to take your specific case, what advantages do you think you will gain?

Exactly the same as for the managers. We are going to save a lot of time by minimising the burden of the compliance stack and have a more rewarding working relationship with our external managers. By broadening the framework, it is true that it is also a good way for Lombard Odier to reiterate its taste for and commitment to technological innovation, which is at the heart of its development strategy.

What difficulties do you see in the adoption of this blockchain platform?

Anything that is very innovative, like this blockchain platform, requires a certain amount of time to adapt. Especially since blockchain technology is a wonderful tool for digital transformation, but its image is still a bit too much associated – wrongly – with crypto-currencies. To convince future users of the Wecan platform, it is therefore necessary to explain its mode of operation and the advantages they will gain from it. Over time, adoption will come very naturally.

How do you see blockchain transforming the world of finance and more specifically wealth management?

It is clear that blockchain will have a huge impact on the financial services sector and will create a lot of value in the process. I would just like to mention, as an example, the digitalisation of intangible assets and their appearance on new financial markets. The blockchain will allow the tokenisation of real, illiquid assets, such as real estate, works of art or even prestigious vehicles, in order to offer access to a much broader investor base. Frankly, these are new worlds that are opening up to us today, and they hold great opportunities.

Click here to find this article in French: https://sphere.swiss/creer-un-environnement-de-travail-plus-performant/

Click here to find this article in German: https://sphere.swiss/de/baf-auf-dem-weg-zu-einem-leistungsfaehigeren-arbeitsumfeld/ 

Innovation in the Swiss financial landscape.

 

Presentation of the pioneering  blockchain platform for compliance: Wecan Comply 


With the entry into force of the FinIA and FinSA laws  on January 1, 2020, independent asset managers and  trustees are no longer supervised solely by banks,  but also by supervisory bodies. The procedures  for identifying, controlling and monitoring client  relationships are becoming increasingly complex.  Measures must be put in place to avoid the  increasingly time-consuming duplication of the  same tasks. 

Our digital platform, Wecan Comply, is the result of a  year-long collaboration with a panel of major financial  

players. It has been built in order to best address  the compliance challenges of today and tomorrow.  The swiss-made solution meets two expectations:  to prevent compliance and administrative work  from overwhelming the daily activity of asset  managers, and to ensure that specific tasks are  performed correctly and reliably, while respecting  new regulations.  

Wecan Comply is built like a digital safe. The  solution allows banks and asset managers to store  and exchange their compliance documents in an ultra-secure way, and with ease. The platform runs on a simple web browser and requires only Internet access. 

“We are passionate about helping financial institutions of all sizes dramatically accelerate their digital transformation. Wecan  Comply combines the most advanced compliance services  with the most advanced technology. These enable our clients, leaders in their field, to achieve the industry’s best cost-income ratios of 26.8%”explains Vincent Pignon, CEO of Wecan Group SA.  

The new technologies used in Wecan Comply are particularly well suited for the centralized management of KYC data of independent asset managers by custodian banks. The procedures resulting from these technologies ensure that the data is up-to-date, while the centralized storage certifies the uniqueness of the data. State-of-the-art security also ensures protection against unauthorized access. 

In the near future, even auditors, supervisory  bodies and other third parties will have access to  the data they are interested in. In the broad future,  further extensions of the platform’s services can be  envisaged. 

Wecan Comply is already used by 10 custodian banks  in Switzerland, including Pictet, Lombard Odier,  Mirabaud and Reyl. The latter have invited more than 50 external asset managers to use the platform  and join the 120 active users. Wecan Comply has  grown by 230% since its launch in early 2021. 

The Wecan Comply solution will be presented at an  event organized by GSCGI on June 30, 2021 at the  Metropole Hotel in Geneva.