Luke Parker || Blockchain Adoption || Bnp Paribas || France
BNP Paribas Securities Services recently announced that it’s “expanding its blockchain platform for private stocks.” The aim is to enable private companies to legally issue minibonds via crowdfunding platforms, in accordance with the new French crowdfunding regulations. “Issuers and investors will benefit from a standardised process, which will ensure financial transactions are performed quickly, efficiently and securely,” the company said.
The first French equity crowdfunding platform launched in 2007, making the country among the first to embrace the new business model. A May report by the European Commission found that France had the second highest number of live crowdfunding platform in Europe by 2014, behind only the UK.
According to the European alternative finance consultancy network CrowdfundingHub and the crowdfunding professional’s organization Financement Participatif France (FPF), the French crowdfunding industry was worth over €300 million in 2015.
The figure includes all types of platforms, across 140 different crowdfunding websites. Of the €300 million, €137.5 million was spent on Peer-to-peer consumer lending, while business lending issued €31.6 million in credit, and €50 million was invested in direct equity. €24.1 million was invested in company bonds to businesses across the country.
At the 3rd annual meeting of FPF, last March, the French Minister
of Economy, Emmanuel Macron, said the crowdfunding sector acts as “an innovation laboratory preparing France for a more open, more technology-based, more decentralized economy.”
Macron believes that crowdfunding meets the needs of both small-and-medium-sized enterprises (SMEs) as well as retail investors. The industry provides SMEs with previously unavailable funding, and alternative investments which could yield better returns as well as develop new relationships.
The Minister also announced several changes in French crowdfunding regulation, following up on previous changes promoted last spring.
Commercial papers, in French bons de caisse, have been used for by several crowdfunding platforms over the past few years. Crowdfunding platforms registered as equity crowdfunding advisors are now officially authorized to intermediate this simplified form of bond, which have been renamed as mini bons in French. The term was added in the April 2016 Ordinance No. 2016-520 relating to cash vouchers.
The crowdfunding consulting company Montaigne Conseil explains that the government intervened in the use of the instruments to provide some protection for investors. They can no longer be “traded anonymously and must be subscribed directly with the issuer,” the company states. “They are now registered shares (to avoid any risk of money laundering or terrorist financing).”
The French Minister of the Economy proposed that these mini-bonds be managed by blockchain. According to Marc Younes, head of business management at BNP Paribas Securities Services’ Innovation & Digital Lab, the companies new initiative “answers the French government’s call to make use of distributed ledgers to support the sale of minibonds via crowdfunding platforms.”
“The government is also encouraging crowdfunding companies to consider using distributed ledger technology, rather than existing individual ledgers, to ensure the authentication of transactions,” Younes explains. “Blockchain technology is particularly suited to the fundraising needs of private companies as transactions volumes are typically lower than for listed companies. This technology could also serve to standardise processes around the trade lifecycle of minibonds.”
BNP Paribas Securities Services is a wholly-owned subsidiary of the BNP Paribas Group. With approximately US$9 trillion in assets under custody, Accuity's Bankers Almanac ranks BNP Paribas as the largest bank in France and fourth largest in the world.
The initiative is in partnership with French renewable energy crowdfunding specialists; Lendosphere, Enerfip and Lumo.
Enerfip launched late in 2014. The green energy crowdfunding platform specializes in a broad range of French renewable energy projects such as solar, wind, hydro, biomass and marine energy generation. Investors can pick a project to invest in via a format much like Kickstarter. With three active campaigns the website has fewer than their competitors, but the projects tend to be from established public companies.
"At Enerfip, we are convinced of the opportunities blockchain presents for our business,” Léo Lemordant, chairman at Enerfip, said. “A project of this scale requires collaboration between industry participants and we are delighted to be working with such a renowned actor as BNP Paribas Securities Services.”
Lumo was the third French eco-conscious crowdfunding platform dedicated to funding renewable energy when it started in 2012. Of the three, it has the widest range of project sizes, from a large wind or solar project that can power tens of thousands of homes to small refurbished hydro mills. The latter project is among the most popular on the site.
Lumo has the most experience with blockchain technology, having joined the SolarCoin project in 2014. The company started receiving Solarcoins for their part in generating solar energy. SolarCoins are currently worth about $0.06, and each coin represents 1 Megawatt of energy generation by an accepted member company.
Launched in December 2014, Lendosphere is a French crowdfunding platform dedicated to ecological transition. The investment platform lists various green energy and green development projects allowing individuals to finance them and earn interest. The Lendosphere website allows international projects like a solar farm in Namibia. All of the current projects on Lendosphere’s site launch in less than two months.
“As a top three crowdlending player in France, we are keen to explore how new technologies can help grow our industry,” Amaury Blais, chairman at Lendosphere, said. “We are delighted to be associated with BNP Paribas Securities Services’ innovative project and participate in setting efficient and standardised processes, which will ultimately help private companies’ fundraising efforts.”
A separate BNP Paribas Securities Services pilot is also due to launch later this year. BNP announced a strategic partnership with SmartAngels in April, a leading crowdfunding platform in France.
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