The Swiss token exchange creating a market for small company shares

[DEC 2023]

Key Insights from this interview

When it comes to investing in start-ups or SMEs, it makes more sense for retail investors to purchase shares in local or national companies than to invest in their foreign equivalents, because local knowledge ensures superior information flows and better judgment.
Switzerland is an ideal jurisdiction to encourage equity investing in smaller companies because the economy supports 500,000 companies, of which less than one in a hundred (just 230) is publicly listed and available for investment on the stock exchange.
In Switzerland, the Federal Act on the Adaptation of Federal Law to Developments in Distributed Electronic Ledger Technology (known colloquially as “the DLT law”) has provided a flexible legal foundation for the issuance of tokenised equity.
Blockchain technology is a means and not an end – it is the ability to raise capital, not the convenience and efficiencies afforded by blockchain technology, that determines whether a company wishes to issue shares on to the Aktionariat platform.
Issuers value the convenience of being able to issue shares at low cost without securing subscribers because it enables them to tailor fund raisings to immediate investment needs and lowers their overall cost of equity capital.
The issuance costs are lower because the number of intermediaries associated with an issue is much lower than in a traditional IPO, with even the mandatory legal and customer due diligence services supplied by specialist third parties partnered with Aktionariat.
Aktionariat offers issuers access to c.1,500 experienced investors, opportunities to pitch to investors at bi-annual events, help from specialists (Founder Studio) to raise the minimum CHF 100,000 required to set up a stock corporation and data rooms to attract institutional money.
On the cash side, Aktionariat has formed partnerships with Bity (so investors can exchange fiat currency for cryptocurrency to invest) and Monerium (so investors can turn cryptocurrency received from sales of tokens back into fiat currency).
The Aktionariat relationship with Swiss digital exchange SDX delivers trust, access to potential investors and issuers among the clients of the Swiss private banks, and the beginnings of an integrated network of tokenised capital market networks and infrastructures.
Investors in equities available on Aktionariat can hold the tokens in any wallet compatible with the WalletConnect protocol, or use the Aktionariat custody app or, provided tests are successful, with any Swiss bank providing a digital asset custody service.
Issuers are exempt from running KYC and AML checks on investors because no financial intermediaries are involved in the issuance, but issuers retain the right to refuse investors entry to their register, and some do use third party services to run checks voluntarily.
Issuers on the Aktionariat platform provide liquidity directly by reserving sufficient cash to be able to buy shares back from sellers, in a principal-based mechanism akin to that provided by asset managers to investors in open-ended mutual funds.
All transactions in tokenised shares on the Aktionariat platform, whether they are purchases or sales, must pass through a user interface (called Brokerbot) to the market smart contract that ensures tokens are always exchanged for cryptocurrency on the platform.
Aktionariat expects a liquid secondary market in tokens to develop over time as liquidity improves and is already introducing an option that will allow sellers to accept prices lower than Brokerbot when issuers are not providing liquidity as principals.
The fact that the Aktionariat platform is an open, permissionless network built on the Ethereum blockchain testifies to the confidence of the founders in the long-term potential of public blockchain networks, and in the greater security and liquidity of the Ethereum protocol.
The growth strategy for Aktionariat outside Switzerland is focused on the United States and the United Kingdom rather than the European Union (EU) because the prospectus requirements of EU law make it more expensive to raise equity capital in the EU.
The main obstacles to the growth of tokenised equity markets around the world are continuing legal uncertainty and a misapprehension on the part of financial institutions and institutional investors that tokens are synonymous with cryptocurrencies.

Success in tokenising equity is unusual. Most issues of tokens are asset-backed versions of existing bonds or fund shares. So the fact that Zurich-based token platform Aktionariat has succeeded in attracting a variety of small company issuers is a considerable achievement. The goal of the firm is to help start-ups and SMEs, initially in Switzerland but eventually around the world, raise equity capital from third parties at low cost. Its strategy is to reduce dramatically the costs of issuance and post-issuance operations such as settlement and registration. Aktionariat has also formed a string of partnerships with specialist service providers and with SDX, the digital arm of the Swiss stock exchange, which helps the company secure access to the clients of the Swiss private banks. An ingenious liquidity model, based on the principal-based trading of shares in mutual funds, meant that by the end of 2022 Aktionariat was already host to 29 issuers, had as many companies again preparing to issue, and had identified dozens more on a target list that ultimately spans the entirety of the enormous Swiss private company market. Dominic Hobson, co-founder of Future of Finance, spoke to Nicola Plain, CEO of Aktionariat, about where the company came from, what it has achieved so far and what it plans to accomplish in the future.

A full recording of the interview is available on this page. A transcript of the interview, which follows the questions below, is also available if you click on “Read the Transcript.” If you click on any question you will be taken to the exact point in the recording where the question is asked and answered.

Read the Transcript

What led the founders to create Aktionariat?

What sorts of issuers and investors is Aktionariat looking to work with?

How important is Switzerland, in terms of the structure of the economy, to the success of Aktionariat?

How important is the law in Switzerland to the success of Aktionariat?

In terms of issuers, which of SMEs, start-ups and B2C companies are your principal target market?

Which sectors of the economy are proving most fruitful in terms of attracting issuers?

How important to the issuers is the ability to create shares in advance and tap the market only when they need the funds to invest?

Are your issuers interested primarily in raising equity or debt?

How many issues has Aktionariat hosted so far?

What services does Aktionariat supply to support issuers?

Do issuers have to work with your approved list of third party partners?