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Project Review: Mt Pelerin

Overview:

The goal of Mt Pelerin is to build an entire bank on chain for fairer, better banking. They plan on achieving this by creating a blockchain-based modular platform with a tokenization system that aims to bring the entire bank’s balance sheet on chain, meaning anyone will be able to view the bank’s assets, liabilities and capital at any particular point in time. With an open approach that would allow external banking and financial organizations to be included, the goal of the platform will be to leverage tokenization to democratize investment opportunities to the public while heavily rationalizing the traditional cost structure of those financial services.

Banks of today:

Most banks operating in today’s society are fractional-reserve banks. What’s fractional reserve banking you ask? Fractional reserve banking is a banking system in which only a fraction of bank deposits are backed by actual cash on hand and are available for withdrawal. So let’s say 10 people all use the same bank, they all get paid their wage of 1,000 USD into their accounts every Monday. Out of the 10,000 USD deposited every Monday the bank may only have 1,000 USD available for cash withdrawal/transfer. Meaning if all 10 people wanted to withdraw money they’ve spent the previous week working for, legally banks aren’t required to keep enough available cash to fulfill all their clients requests, and instead operate on a first come first served basis. This approach allows banks to continually make record profits by leveraging deposits beyond their reserve ratio into interest-paying investments. And to really rub salt into the wounds of consumers they charge fees for holding money they actually don’t have in their reserve.

Obviously people being denied access to their money would cause social anger. To minimise the risk of this occurring, banks are subject to stringent rules and requirements set by regulators regarding solvency and liquidity. However, those rules involve the conduct of audits, stress-tests and other forms of verification on a regular basis. Considerable human and financial resources are used to ensure the bank complies with the rules and regulations. Failure to comply could result in the banks licence being withdrawn until compliance is met.

Banks of Tomorrow:

Mt Pelerin strives to build a bank of tomorrow and provide a solution which goes above and beyond in solving the problems mentioned above. Their solution revolves around three key pillars.

100% Deposit Reserve

Source: Mt Pelerin whitepaper.

Unlike traditional fractional-reserve banks, our goal is to give up on-balance sheet credit and keep deposits at 100% in reserve, with institutional custodians.

The state of total deposits and their evolution will be recorded on the Ethereum blockchain and will be completely transparent to all in a permanent and immutable way.

Tokenization of the Bank

Source: Mt Pelerin whitepaper.

The core principle at the heart of the project is the blockchain-based tokenization of the entire bank’s balance sheet. With ambitions to tokenize assets (loans, for instance) and liabilities (deposits), i.e. issue them on the Ethereum blockchain (at launch) as ERC20 compatible tokens, creating an ecosystem where smart contracts could be applied. With this approach, they want to bring an unprecedented level of liquidity and convenience to the trade of banking and financial instruments, resulting in disruption of the status quo. This would also create an effective bridge between crypto assets and classical finance.

Marketplace:

Source: Mt Pelerin whitepaper.

The core feature of Mt Pelerin is their tokenization concept. This concept will give customers access to an on-chain marketplace allowing direct integration to e-banking. This system would aggregate the products and services from multiple providers, providing an exceptional level of choice. In this way the marketplace aims at letting users transact directly between them and thus eliminating, the intermediaries and associated costs usually involved with traditional banking services.

Additional features:

Currency spot exchange The first marketplace to be implemented is a currency exchange offering spreads 10 to 20 times cheaper than traditional banks. On it, customers would be able to easily exchange 30 fiat currencies plus Bitcoins and Ethers (subject to relevant regulatory authorizations). Built with a liquidity bot whose purpose is to act as a market maker: executing transactions back-to-back with fiat and crypto brokers.

Multi-Currency Debit Card — Clients will be able to make international withdrawals and payments with the debit card connected to the currency exchange and capable of on the spot conversion with the lowest fees and a high level of control.

Futures & Derivatives — Just like Mt Pelerin on the spot exchange market, it intends to connect market makers and liquidity providers on a future and derivative marketplace. Aiming to become the Swiss-regulated BitMex.

Team:

Arnaud Salomon — CEO

  • Worked for UBS investment bank (6 months) — Front to back security and fraud assessment.
  • Masters degree in engineering and communication from Ecole Polytechnique Fédérale de Lausanne, one of two Swiss Federal Institutes of Technology.
  • Previous experience as a commodities trader, managing a large portfolio.

Cyril LAPINTE — CTO

  • Over 10 years experience in software development.
  • Worked for Atos International for 4+ years. Atos is a global leader in digital transformation with 120,000 employees in 73 countries and annual revenue of € 13 billion. European number one in Cloud, Cybersecurity and High-Performance Computing.
  • Previous experience building software system for the SWISS financial system, worked for SWISS EXCHANGE. SIX is the backbone of the Swiss financial centre, providing services in the field of securities trading, the provision of financial information and cashless payments.

Jingyao Jin — COO

  • Over 5 years experience working at Banque Cantonale Vaudoise. Positions held included quantitative analyst and investment manager. Banque Cantonale Vaudoise is the cantonal bank of Vaud in Switzerland. In terms of balance sheet size, BCV is ranked among the top five universal banks in Switzerland and is the second largest cantonal bank in the country after Zurich.
  • Worked at Deutsche Bank as Securities master file, Operations.
  • Bachelor’s degree of science in economics. Master’s degree in finance, finance engineering & risk management.

Advisors:

Alexandre Kozma

  • Extensive experience as portfolio manager.
  • Currently employed at Pictet Group. Pictet is an investment-led service company, offering wealth management, asset management and related services. With more than CHF 509 billion in assets under management or custody at 31 December 2017, Pictet is today one of the leading Europe-based independent wealth and asset managers.
  • Master in Communication Systems with a minor of specialization in Management of Technology and Business entrepreneurship.

Marc Bettinger

  • Worked for private banking investment firm Julius Baer.
  • Employed at Credit Suisse for over 9 years. Positions included Credit Risk Modeler and Lombard consultant.
  • Banking Economist from Frankfurt School of Finance & Management and a Certified International Investment Analyst (CIIA) from the Swiss Financial Analysts Association (SFAA).

Token Metrics:

Ticker: MPS

Token Type: ERC20

Price per Token: 1 MPS = 5.00 USD (Based on a company valuation of CHF/USD 50M)

Hard Cap: 2,500,000 USD

Total Token Supply: 10,000,000 (100%)

Total Tokens Sold During both Pre/Main sale: 500,000 (5%) — Freely transferable

Presale Discount: 20%

Main sale Discount: N/A

Token Reserved for Company: 9,500,000 (95%) These tokens will remain illiquid and off market.

The remaining 95% of tokens will have a locked transferability bond via shareholder agreement, reducing the risk of share/token dilution.

Use of funds from token sale:

As per Mt Pelerin’s White paper funds will be used to cover.

  • The ongoing legal costs linked to the structuring and issuance of the MPS token.
  • The costs linked to FINMA licensing process.
  • The consolidation of their core team and constitution of a board of directors and executive committee as required by FINMA.
  • The provisioning of upcoming funding and marketing costs.

Main Funding Round:

Mt Pelerin white paper states,“ In Switzerland, the minimum capital requirement to become a bank is CHF 10M. However, during the last decades FINMA has never granted a full banking licence for capital below CHF 20M.” Potential investors should understand that there will be another funding round to raise the required capital to meet FINMA’s standards. As per telegram discussions, Mt Pelerin hasn’t identified the number of shares they will have on offer to achieve the required capital nor the share price in which they will be sold. This main funding round will be for institutional long term investors only. However shares sold to raise the capital will not be listed on any stock or crypto exchange and investors will only we able to sell their tokens via private agreement.

See below snapshots.

Project Concerns:

  • Personally I feel a project valuation of 50 million is quite high.
  • Blockchain is still in its infancy, real world use of a “blockchain bank” could pose a problem.
  • Huge competition from banks, who have the funds and resources to onboard a similar system if they see a competitor potentially capturing a market share.
  • As Mt Pelerin will not charge banking fees and instead will charge commission on marketplace trades, revenue is dictated on the volume use of the marketplace.

Areas for Improvement:

  • I’d like the webpage to clearly state ‘Mt Pelerin is a project to create a bank. It is not a bank and is not yet licensed as such by Swiss authorities’ at the top of the page. Instead of having a * after Bank then having to scroll to the bottom of the page to see what the * dictates.
  • I think it would be beneficial to keep the transparency flowing with a section that allows investors to see updates on the project meeting FINMA requirements, what meetings the team has scheduled and of course platform development.

Our Opinion:

We like the concept and transparency Mt Pelerin has set out to bring to banking. The team has an abundance of experience within the financial sector and in our opinion can deliver what they’ve set out to achieve.

A quick google search returns that banks in America alone for the year of 2017 made $42.3 billion in bank fees alone. These institutions are governed to maximize profit and appease shareholders. Less profit in turn means less dividends paid to shareholders. So the question has to be asked, how are these financial institutions going to react to a concept that could potentially reduce their bottom line?

No one knows how blockchain will affect the future, and in our opinion these shares/tokens are a long hold. If Mt Pelerin can become what the team intends it to be this may be an opportunity to be part of something big.

Our Grades:

  • Long Term 7/10
  • Flipping 1/10 *

* Current market condition does not bode well for ico flipping.

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Written By Michael Gibb, Telegram @gibboh.

If you want to email us: contact@gains-associates.com.

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