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Arnaud Salomon, head of Mt Pelerin, wants to move the banking business to the blockchain and take his own banking software to compete with the likes of Avaloq. But before he can sign up his first clients, he needs Finma approval, he told finews.com in an interview.

Some say that crypto finance is the solution waiting to find a problem. Why does Switzerland need a cryptobank such as Mt Pelerin?

To be perfectly clear from the beginning: we aren't developing a cryptobank as such.

Isn't that what you were generating financing for?

No, trading with cryptocurrencies is only one part of the innovations enabled by the blockchain and something that we will provide only at a later stage. At Mt Pelerin, we are mainly about using the blockchain technology to further develop the business model of banking.

How's that working?

We replicate the entire banking sheet with digital tokens, starting with the client assets. For onboarding and all other services we have created our own, automated regulatory framework. The protocol verifies the identity of the client, including through the use of video identification. It also certifies which services are adapted to his risk profile and what in turn we aren't allowed to offer. That way the protocol is building a wall around each client.

And further?

From that point onward, the protocol is leading all transactions and enables us to efficiently build bridges from the old world of IBAN numbers to the blockchain world.

«We will never use the savings of our clients to place bets on the financial market»

At the same time, we make sure with the help of the protocol that the tokens – and hence the money and investments of our clients – have a known counter-party and a value they're based upon. That way they are less prone to abuse and fluctuation of value.

But that way you will only get half of the balance sheet, half of the blockchain bank, no?

The lending business obviously is extremely interesting for business models based on the blockchain. Loans and mortgages in essence are contracts that can be written onto the blockchain in a tokenized fashion. That way they suddenly become very liquid and tradeable – a similar procedure as in a securitization. We are basically translating something that already exists into a new world.

Mt Pelerin, which chose its name in reference to the libertarian Mont Pèlerin Society, also has an ideological approach. How will it influence the future business of the blockchain bank?

Indeed we follow certain philosophical principles, such as sovereign money and full-reserve banking. According to these principles, banks at all times have to cover sight deposits of their customers persistently and to 100 percent through cash reserves. And the creation of money cannot occur through the granting of credit by private banks. And hence, we at Mt Pelerin won't generate a business on interest margins. We will never use the savings of our clients to make bets on the financial market.

Granting loans however is one of the central pillars of Swiss banking. How exactly does Mt Pelerin want to earn money?

That's a good question. We won't earn money through interest margins, but from commissions. We create markets that our clients can use to invest their money in tokenized assets. As a bank, we will have access to the SIX Swiss exchange and securities traded on its platform. We aim to offer the complete spectrum of issuers and financial producers – and indeed including mortgages. We would like to act as brokers for other banks.

However, so far, Mt Pelerin isn't a bank. You expect to receive the license from the federal regulator Finma by the end of 2019. Others, including Sygnum and Seba also vie to become the first Swiss cryptobank. Who will win this race?