This week, the Prince’s Government announced its approval of security token fundraising efforts, a system allowing investors to use tokens to fund social impact projects. It is Monaco’s first major step to becoming a regulated financial hub within Europe.

Monaco’s Office of Digital Affairs announced on Thursday that they had signed a Memorandum of Understanding (MoU) with Luxembourg-based start-up Tokeny to set up a token system for fundraising and investment in projects in the Principality and beyond.

Security tokens, a form of cryptocurrency exchange, can be used to trade real financial assets, using a virtual record system known as blockchain to store and validate token transactions permanently in a way which is entirely verifiable.

Streamlining investment in social projects

The signing of the MoU coincides with the National Council’s vote last week on a security token offering (STO). This “token system” is the first major step in supporting environmental and social governance (ESG) projects to be approved by the government.

The deal will support Monaco’s ambition to become the world’s first State to utilise the benefits of decentralised finance in its aim to become a Funding Nation for progress.

“Monaco is moving towards its ambition to become a funding nation for progress with our STO framework,” said Frédéric Genta, Delegate for Digital Affairs. “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.”

How does STO work?

Possible security token holders are all qualified investors which means they must come up with a minimum investment of about $100,000.

Tokens will reach investors via marketing around the ESG projects that the Principality approves, as well as in distributions channels through private banks and brokers.

For projects looking to issue tokens, these will have to first be presented to the Prince’s Government, which will assess and approve them. It is a benefit for investors, able to utilise the pre-selection and approval process carried out by the Prince’s Government. The token issuer also needs to 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 in Monaco… and beyond

Although the projects must set up as an entity in the Principality, it does not mean their ESG project must take place in Monaco. If project organisers want to market tokens to investors outside of Monaco, they will have to comply with local financial regulations.

“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 representing Euronext. “We are proud that this project embeds clear ESG components and enables sustainable finance.”

Environmental projects underway

The first environment-based project to implement STO comes from production company Icebreaker, the group responsible for “March of the Penguins”, the Oscar-winning documentary.

Icebreaker is looking to raise around $50 million and plans a number of exhibitions and other projects, in addition to a movie.