Ultra-Rich Monaco Wants to Fund Social Impact Projects With Security Tokens

The Principality of Monaco, a popular haven for the mega-rich, has begun approving security token fundraising efforts, the first step to becoming a regulated on-chain finance hub.

Announced Thursday, Monaco’s Office of Digital Affairs has signed a memorandum of understanding (MoU) with Luxembourg-based blockchain startup Tokeny, which is part-owned by European stock exchange operator Euronext N.V.

The MoU coincides with a dedicated security token offering (STO) law voted in by Monaco’s National Council last week, and the whole tokenized finance endeavor will support environmental and social governance (ESG) projects to be approved by the government.

“Monaco is moving towards its ambition to become a funding nation for progress with our STO framework,” Principality of Monaco Delegate for Digital Affairs Frédéric Genta said in a statement. “Two key milestones were achieved: a dedicated STO law was voted by the National Council and we are welcoming Tokeny to the Principality to operate our STOs.”

Given Monaco’s high concentration of wealth (one in every three people is a millionaire and the place attracts hundreds of billionaires), it’s surprising it doesn’t have much of a financial center like the comparably small Lichtenstein or Luxembourg.

“[Monaco] is not a financial place for the moment, so they took this opportunity with security tokens to prove in Europe they can do compliant, on-chain finance,” said Tokeny Solutions CEO Luc Falempin. “Most of the high-net-worth people in Monaco are buying real estate. The idea now is for investors and money in private banks in Monaco to invest in green projects.”

STO spenders

Prospective security token holders being wooed in Monaco are qualified investors, roughly the same as accredited investors in the U.S., explained Falempin, which means coming up with a minimum investment of about $100,000.

The tokens will reach investors thanks to publicity around the ESG projects Monaco approves, and also distributions channels via private banks and brokers, said Falempin. Investors benefit from a selection and approval process and the Tokeny platform makes it very easy to manage digital assets with features like a recovery process, he said.

For projects looking to issue a token, these will have to first be presented to the government of Monaco, which will assess and approve them. The token issuer also needs to obtain a visa and set up as an entity in Monaco.

“Monaco will select between five and 15 projects a year and each of these will be looking to raise between $20 million and $200 million,” said Falempin. “So, it could mean raising around $1 billion a year.”

Tokeny tech

Under the hood, the tokenizing system is based on Ethereum’s ERC-20 standard and the tokens are compatible with all Ethereum wallets. If projects want to market tokens to U.S. investors, for example, they will have to comply with local rules, so a Reg D or Reg A in the case of the U.S. Securities and Exchange Commission (SEC).

Further announcements involving Euronext, which owns a 23.5% stake in Tokeny and has two seats on the startup’s board, will emerge in the coming weeks, said Falempin, adding that the firm wants to keep its powder dry on the topic of secondary markets for now.

“As a strategic investor in Tokeny Solutions, we are pleased that the Principality of Monaco has appointed the company as the tokenization platform of government-approved innovative projects,” said Pierre-Edouard Borderie, a member of Tokeny’s board of directors who represents Euronext. “We are proud that this project embeds clear ESG components and enables sustainable finance.”

Movie magic

The first environmentally focused project made public comes from Icebreaker, a production company behind “March of the Penguins” from Oscar-winning documentary filmmaker Luc Jacquet.

Falempin explained the IceBreaker project is looking to raise around $50 million and plans a number of exhibitions and other projects, in addition to a movie.

“As well as ‘March of the Penguins,’ they did the hugely successful Antarctica exhibition. Now, they are planning four or five others, and token holders will get revenue shares on all of these,” he said.