The race to create a standardized framework for a new era of tokenized securities on the blockchain is ramping up. Often cited as the ‘future of banking,’ tokenized financial instruments present some compelling advantages in areas such as automated compliance, settlement times, and asset interoperability.
Issuance platforms for security tokens, which are securities issued and tradeable on a blockchain, are on the rise as service providers enter a budding market gleaming with potential. One firm, Mt Pelerin, is striving to extend the concept of tokenized securities to an entirely new dimension, building a whole bank on the blockchain in Switzerland.
It’s an ambitious goal, and their open-source, compliance-focused tokenization framework was the first step in creating a modular and durable framework for the issuance of financial assets on Ethereum. Now, Mt Pelerin has taken the next significant step forward on its path towards open finance with the announcement of its one-stop shop tokenization services to supplement the open-source tokenization framework.
According to, Arnaud Salomon, MT Pelerin Founder, and CEO,
“The purpose of our services is to provide easy access to startups and companies in the digital asset market to the most advanced compliant tokenization framework and professional services.”
The Future of Open Finance
Much like how the early revelations of the Internet’s potential in the 1990s helped to reshape much of Wall Street today, financial institutions are slowly beginning to realize that the trend towards open financial products is inevitable.
Based on the concept of bringing more transparency, efficiency, automation, and censorship-resistance to the financial system, open finance [i.e., DeFi]is an emerging trend in the cryptocurrency market. Open lending protocols that issue loans via smart contracts — such as MakerDAO – along with other financial instruments such as security token styled bonds built on the network Ethereum are making headway among conventional finance entities.
Many financial institutions have relied on permissioned blockchains so far when it comes to experimenting with digital assets, meaning closed systems where banks would remain the gatekeepers. However, as more research and effort is conducted in the space, banks realize that open financial systems, just like the open and early permissionless Internet, may be unstoppable and in fact attractive.
Mt Pelerin has taken this sentiment and run with it, striving to build all of the financial products and instruments offered by a traditional bank on a chain – completely open-source and available to everyone. At its core is Mt Pelerin’s open-source framework for issuing digital assets like securities in full compliance of financial regulations.
Mt Pelerin’s existence in Switzerland has also provided them with a unique opportunity to expand on their open-source tokenization framework, however.
Salomon also added:
“With its comprehensive and flexible compliance enforcing capabilities, our protocol is the best candidate to establish a tokenization standard, we are working toward a standardization via our membership of the CMTA and its big industry members such as Swissquote, Temenos, Pictet, UBP and more.”
The CMTA is the Capital Markets and Technology Association in Switzerland, an organization deeply embedded in Geneva’s legal and financial sector, whose objective is to define common standards for the application of distributed ledger technology to banking and finance. Combined with Mt Pelerin’s financial intermediary authorization, the firm can offer a complete range of professional services surrounding a token issuance that other issuance platforms rely on third-party service providers for.
“Unlike other asset issuance platforms in the market, we are an authorized financial intermediary in Switzerland, we can conduct KYC/AML on behalf of our clients, provide services such as the setup and support on share purchase agreements, and we are one of the few providers that can collect fiat funds on behalf of clients with full AML compliance documentation for their bank.”
Mt Pelerin’s services are designed to supplement the potential of its open-source tokenization framework. For companies looking to tap into open financial assets or issuance on the tokenization framework, Mt Pelerin can guide them through the process and make the whole experience as simple as possible. And what separates the tokenization framework from other protocols built on Ethereum is important.
“Our protocol is capable of cross-asset compliance, meaning that the programmatic and management of regulatory compliance is independent of a particular token issued on the protocol and can, therefore, be applied and enforced across tokens, time and users.”
This design is different from other protocols, where achieving compliance is typically a confluence of third-party service providers and token whitelists. “It is a much more refined approach than other protocols, which manage compliance with a whitelist for each token they issue.”
Tokenized assets promise to be highly disruptive for capital markets. Direct exchanges between buyers and sellers, self-issuance capabilities, fewer intermediaries, and a customizable token framework are all optimal arrangements for granting broader access to a historically walled garden of finance where access by small and medium enterprises is curtailed.
With an innovative open-source protocol, a suite of new professional tokenization services, and residence in a regulatory-friendly haven like Switzerland, Mt Pelerin believes they have a significant advantage to offer companies in the digital asset market.
Salomon also said:
“We are the tokenization leader in Switzerland, with not only the open tokenization framework we built but also with many productive relationships with Geneva banks and institutions who consult us on the topic.”
Balancing Cypherpunk Principles and UX With Multi-Party Computation
One of the fascinating, and frustrating, aspects of the broader cryptocurrency space is the prevalence of trusted third-parties in an ecosystem built on the notion that trusted third parties are security holes. From honeypot exchanges to custodial services with “bank-level encryption,” much of the crypto ecosystem is non-representative of its origins.
Without diving into the adverse outcomes of these third-parties in the ecosystem, of which there are many, one of the underlying frictions of centralized security is the inherent trade-off between security and user experience [UX].
The crypto landscape is esoteric enough as it is, let alone requiring users to manage their own keys and understand concepts like GAS on Ethereum. In fact, new user onboarding was named as the biggest obstacle to dapp development by projects on Ethereum. While there have been strides made in UX among many crypto products, ranging from DeFi tools to wallet interfaces, there is much work to be done.
The daunting task of converging security and UX into a safe and user-friendly experience has received a glimmer of hope in recent months, however, due to a unique subfield of cryptography–secure multi-party computation [sMPC].
A Wave of sMPC Innovation
The core concept of sMPC is to collectively derive a unique computation from a subset of individual fragments like non-trusting computers. Imagine a puzzle with individual entities, each holding a piece, and the final image only materializing after a specific threshold of pieces have been put together.
MPC has been lauded as the next fuel for innovation in onboarding users to crypto by reducing a significant portion of the barrier to entry — mainly key management.
“Ultimately, using sMPC, we can realize the separation in data of the right to use and the right of use, and directly calculate results on multi-source and heterogeneous ciphertext data,” detailed ArpaChain CEO, Felix Xu, in a ChainNode AMA. ArpaChain has emerged as one of the leaders in sMPC globally, and already has a functioning product on its testnet.
Their insights and innovation into sMPC represent a broader initiative to reconcile the issues of security vs. UX.
At a high level, sMPC empowers users to compute something over a large set of data without revealing their individual inputs, furnishing enhanced privacy, and a means to produce a specific outcome. Consequently, sMPC affords advantages over two existing modes of key management: multi-sig and hardware storage.
Hardware wallets and multi-sig are both complicated to use for mainstream users. Hardware storage is offline, and connecting it to online sources breeds security challenges. Conversely, multi-sig works to an extent, but services like Casa are out of the price range of most consumers and also out of their technical peripherals.
Hot wallets [i.e., online wallets] continually demonstrate their proclivity for being hacked, and while they offer the best UX, they are major security vulnerabilities — once again highlighting the quandary of balancing security and UX.
With sMPC, security is bolstered by the fact that no single entity controls the key, and UX is improved because there can even be “keyless” services using sMPC. The perfect crypto wallet does not exist, but sMPC may come to redefine that narrative.
Outside of wallets, the market for sMPC solutions for enterprises is enormous, and an area where ArpaChain is looking to make an impact.
“The ARPA project aims to provide businesses and individuals with private computing power and secure data flow solutions,” says Xu. “The entry point of ARPA is enterprise-level privacy data sharing.”
ArpaChain to The Rescue
Requiring developers to consistently worry about security vulnerabilities takes away from their ability to focus on improving UX and other aspects of blockchain-based applications. Similarly, continually encrypting and decrypting data creates high technical barriers, something which sMPC diminishes.
But some of the real magic also derives from the ability of sMPC to remain secure even in a hostile environment.
“We have implemented an agreement to support the participation of any party, and as long as there is an honest node in it, it can ensure the security of the data. Either of these two points is a breakthrough, and as far as we know, the vast majority of projects can only support the involvement of two parties.”
This is a powerful feature. No longer do parties need to independently hold keys that serve as singular attack vectors. With such security assurances on the back-end, a better UX can be transferred to the front-end — such as “keyless” wallets — which are already happening.
Providing users with an experience that does not require key management is a compelling step forward for the industry. Add in the ability of exchanges and other financial entities to securely, and privately, compute functions over large shared data sets [i.e., blockchains], and sMPC just might live up to its impressive reputation.
“Imagine multi-party joint credit information, data leasing, secure data analysis, and other scenarios in the financial industry such as multi-source data joint risk control in the insurance industry with sMPC. In the future, applications will exist for corporate finance, marketing, medical applications, and even artificial intelligence.”
ArpaChain achieves this dynamic balance using an off-chain, layer two structure — making ARPA compatible with any public blockchain.
“The ARPA secure computing network can be used as a second layer to provide privacy computing capabilities for any public blockchain, enabling developers to build efficient, secure computing networks on ARPA computing networks, while also protecting the data privacy of business applications. Enterprise and personal data can be safely analyzed or utilized on ARPA computing networks without worrying about exposing data to any third party.”
A confluence of security, privacy, and better UX — a compelling proposition.
Overall, sMPC effectively removes the requirement of trusted third parties for security [i.e., custody], the cold/hardware storage solutions preferred by exchanges, and affords a better UX by removing significant points of friction altogether like key management.
What’s the cherry on top? Better privacy.
For enterprises, mainstream users, and the broader trajectory of crypto adoption alike, that’s a potent recipe for success.