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The blockchain: a financing solution for companies?  - Funding & Innovations > Finance function

The blockchain: a financing solution for companies? – Funding & Innovations > Finance function

The blockchain offers companies new financing opportunities. It simplifies and streamlines transactions, while guaranteeing optimal security.

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The cryptocurrency market is currently on the rise and provides an alternative to traditional financial transactions. It relies on the blockchain, which is technology for storing and transmitting information. She is secure and transparent, without a central control body. It also offers the possibility of constituting a tamper-proof database, containing the transaction history shared between all users. Result: more and more companies are interested in this technology for their financing operations “Previously, the blockchain was rather reserved for innovative companies. But we are currently observing standardization of this technology, which has become widespread and simplifiednotes Florent Jacques, co-founder of Finkey, a company that advises and guides shareholders and managers when making strategic decisions.

STOs are gaining ground

To finance companies, the blockchain can be used via two tools: initial coin offerings (ICO) and security token offerings (STO). “Funding in the form of ICO is rather reserved for Web3 companies. Traditional companies will be more oriented towards STO”, says Florent Jacques. This device offers the possibility to finance a company in exchange for tokens valid on the cryptocurrency market. Companies that carry out an STO distribute securities which have the status of transferable security, such as financial securities, allowing investors to hold part of the company’s capital. “The STO can finance, for example, a real estate transaction or stock-type assets”, illustrates Florent Jacques. On the regulatory side, the Financial Markets Authority (AMF) equates STOs to public offerings of financial securitiess. “For STOs of less than €8 million, the procedure is very accessible. Beyond €8 million, the regulatory framework becomes heavier”, says Florent Jacques. In the latter case, companies must in particular submit a document, called a “prospectus”, to the AMF.

Benefits for businesses

“An STO is of interest to SMEs and ETIs as well as large groups. This allows direct access to investors, without a financial intermediary, as well as greater liquidity”, underlines the co-founder of Finkey. This system also facilitates international fundraising. “This type of investment remains complicated today. The STO allows you to break down barriers”, says Florent Jacques. The use of blockchain also offers greater transparency of operations and players, which makes transactions more secure. Nevertheless this form of financing is still quite marginal in French companies. “The technology is ready, but there is still a lack of platforms to streamline these processes”, says Florent Jacques. According to the expert, this tool should greatly gain in popularity over the next few years and could be compatible with other financing methods. “Banks should evolve and integrate this kind of technology into their system. The use of blockchain could in particular be very relevant for small financings of less than €5 million. This would allow banks to streamline and use fewer resources on this type of operation”he explains.

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