Three reasons why crowdfunding could benefit from blockchain, according to BNP Paribas

BNP Paribas is ready to start its own public experiment with blockchain technology, but has chosen a less-discussed use case: crowdfunding.

The French financial services giant is looking to launch a private securities program using blockchain technology, likely in the second half of 2016, in partnership with SmartAngels, a company that allows entrepreneurs to raise funds from private and professional investors.

In an interview, Johann Palychata, product manager at BNP Paribas, said crowdfunding was chosen as the company’s first use case because of its ability to impact the market more directly and quickly than other options.

Palychata told CoinDesk:

“We saw an opportunity to apply blockchain technology to crowdfunding through a small but fairly complex process.”

Palychata said BNP Paribas believes blockchain technology can solve the three major challenges facing crowdfunding: creating standardization, making it easier to manage and register crowdfunded shares, and improving transparency and reliability in the market.

“First, I would say that blockchain can help standardize securities registration, which is very important for crowdfunding.”

Palychata further noted that blockchain will increase transparency and accountability in the market, without reducing the number of participants using the platform as demand increases.

Palychata believes that the company’s approach to blockchain will enter “project mode,” a phase where different prototypes of blockchain are emphasized by the company.

“We’ve been approached by a number of different counterparties and what you can tell from this announcement is that we are indeed going to start looking at crowdfunding,” he said.

Testing in progress

While Palychata did not specify the technology BNP Paribas and SmartAngels would use to build the platform, he did say that tokens on a blockchain would be used to represent ownership.

“The main function is to register the securities on the blockchain,” he said, adding that the start-up operators would then be able to distribute them to investors.

Palychata said BNP Paribas has been testing blockchain technology internally and may soon announce plans to bring in other partners or even an entire ecosystem.

He noted that the project will use the platform’s normal operating orders, investors and startups for real-world testing.

Palychata still did not specify when this work would be done.

“It’s too early for me to announce anything else,” he added.

Secondary Market

When asked about the scale of the project’s impact, Palychata was quick to focus on future planning and not to speculate too much on its possible impact.

The project may be considered successful simply because it has become a platform for securities, but it will not be accepted by major exchanges at present.

“We can see huge benefits that such a platform can bring to the market,” he said. “Obviously, when you have a platform with a lot of issuers and investors, you can develop a secondary market. But it’s not our first goal.”

Regardless of whether startups and small businesses continue to take advantage of crowdfunding or whether they seek out the efficiencies of blockchain platforms, Palychata remains focused on what’s to come.

He concluded:

“Blockchain could become a secondary market, we’ll see.”