Monaco: Financial securities on a blockchain

The Monegasque government is embarking on a digital transformation, the key word of which is dematerialization. The first major project of this transformation is a modernization of the transmission of financial securities.

Recognition of the transmission of financial securities through a blockchain device

The draft law adopted on 4 December 2019 authorizes the digitisation of shares or companies shares. The aim is that their emission and transmission can be carried out by means of a digital recording device on a shared register, in other words via a blockchain protocol.

This permission is granted for unlisted securities, which do not have specific obligations for securities deposits.

Access to such a device is only possible for persons with a digital identity with a high level of guarantee within the meaning of future provisions of the Digital Identity Act.

As for the administrator of this new type of device, he must be a qualified provider. In this sense, it must have sufficient security guarantees and an official qualification. These last elements will be detailed as part of the future law for a Digital Principality.

The blockchain register in reference is described as private, the company that uses it, solely determines the rules of access, operation and administration of this register. The Monegasque law therefore rules out the use of public blockchain.

Benefits of the circulation of financial securities on a blockchain

The benefits are highlighted by Mr Franck Julien, and the co-signers of the bill. They concern several parties: entrepreneurs, investors and shareholders but also the administration. Enough to put everyone in agreement.

For an entrepreneur

The transfer, the cession/assignment and exchange of company’s securities can be done securely and quickly. The executive has access to an overview of the composition of the shareholding in real time.

The issuance and sale of shares of the SARL via blockchain make it possible to free themselves from the statutory identification of the shares by their numbering. This is a significant time saver. An administrative burden is forced to disappear.

Some of the day-to-day practices of companies can be automated and customized with smart contracts. On reading the bill, the idea of employees being interested in automated capital via smart contracts emerges.

For investors and shareholders

They become freer in the transmission of their titles. The transmission can even be automated via smart contracts. In addition, proof of the right of ownership of a security is ensured by the inscription on that register.

This type of registry can be used for the purpose of sharing private information, in the context of societal life. Decisions within the company may be approved through electronic voting.

For the administration

The register ensures perfect traceability and transparency. Control services will be able to ensure the registration and integrity of transfers.

A ministerial decree will determine the conditions under which the various administrative authorities will validate the operations as needed, and exchange between them.

A broader dematerialization project

It should be remembered that this is a major change since, until now, the legislation did not even provide that the shares or shares of Monegasque companies could be dematerialized.

It is mentioned that the next project for a digital transformation of the Principality would be the use of blockchain protocol for future Monegasque national identity cards.

Article Lory Feuvrier