How Can a Bank Build a Profitable Platform that Allows Swiss SMEs (small and medium-sized enterprises) to Issue Equity Shares in the Form of Security Tokens and Sell them to Swiss Private Investors?
Swiss Law's recent integration of distributed ledger technologies (DLT) enables assigning shares with a digital token. These tokens, recorded on a blockchain, improve share transfers, unlocking trading potential for private firms.
Mike Frei, 2023
Bachelor Thesis, Credit Suisse (Schweiz) AG
Betreuende Dozierende: Fabian Heimsch
Keywords: DLT, Token, Private Equity, Blockchain
The current Private Equity market is restricted to high-net-worth individuals and financial institutions, with direct investments usually being of around 20 million Swiss francs. With the adaptation of DLTs, private small and medium-sized companies (SMEs) can open a fraction or all their shares to be traded. This new opportunity brings change to both the way companies were traditionally able to gain capital as well as to investors that wish to invest in private companies. The research aimed to examine the opportunities for a large bank and what kind of customers would be attractive.
In the beginning, the general procedure of financing for SMEs and the technological foundation of DLTs were explored. Then the Private Equity Offering of the bank was investigated to determine how similar the new opportunity would be and what challenges would exist. Moreover, the procedure for the share tokenization of a SMEs was examined. Based on the findings, a proposal was given on how the bank could build a profitable platform enabling the issuance and trading of tokenized shares.
The research concluded that the procedure for tokenizing a SMEs shares is more straightforward than expected, and a lot of information and support is provided to the public on the Internet. Regarding what clients should be served based on the bank's legal obligations, it was concluded that all customers could be served non-advised. However, regarding advised transactions, only high-net-worth clients classified as professionals according to the FIDLEG law should be approached with an investment recommendation. The construction of a fee model was difficult due to limited available information and technological knowledge. Additional services the bank could offer were limited to ensure the platform would be secure and only financially stable participants with good intentions should be allowed. Overall, it was concluded that the development of DLTs should be followed closley and that a vast potential to transform the current state of the market persists.
Studiengang: Business Administration International Management (Bachelor)
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