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- Blockchain pioneer: VP Bank taps into new areas of growth
Blockchain pioneer: VP Bank taps into new areas of growth
Innovative services
Physical collectibles are integrated directly into the banking portfolio and captured in the e-banking system of the customer.
Secure, transparent and efficient
Tokenised collectible assets can now be managed securely and immutably in the blockchain.
New growth opportunities
The tokenisation system takes VP Bank into completely new realms of business, offering unprecedented access to a new customer base.
„VP Bank is committed to the very highest security standards. As a regulated and successful private bank of international standing, it embodies a combination of tradition and innovation. We are extremely selective in our choice of business partnerships. GFT supported us as a highly experienced expert in digitisation processes. With GFT at our side, we have adopted a pioneering role in the industry and laid a solid foundation for further blockchain innovation.“
Awards
Challenge
Manage physical collectibles securely in a digital format
VP Bank offers its clients a comprehensive portfolio of solutions based on professional investment advice and reliable asset management. Until now, it has been difficult to manage collectible assets – pieces of art, jewellery, etc – or other physical assets using conventional bank accounts.
Inheritance is just one issue this raises: How can somebody writing a will or testament ensure distribution is fair and simple – and that inherited items such as works of art are transferred safely?
A customer survey conducted by the bank ascertained that there is strong interest in the tokenisation of collectibles. In 2021, VP Bank registered with the Liechtenstein Financial Market Authority as a token creator and custodian. It then launched a tokenisation project.
The challenge with the project was to develop and implement a digital custody solution within the existing core banking system, while also complying with all standards and regulations according to the Token und VT-Dienstleister-Gesetz (Blockchain Act in Liechtenstein*).
This should reduce the risk, cost and time associated with changing the ownership of art and collection assets by using blockchain technology. Physical assets would need to be mapped and stored digitally as decentralised and encrypted tokens on the blockchain. A smart contract captures the respective ownership rights.
The engagement
Launch of a digital custody system from scratch – in just 12 months
VP Bank began planning its tokenisation solution in 2020. It chose GFT as one of its cooperation partners because the project required extensive expertise in both blockchain technology and the banking industry.
The project support provided to VP Bank by GFT’s experts ranged from selection of the technology to the design of the user journey and complete implementation.
GFT and VP Bank jointly decided to deploy the tokenisation engine in the Azure cloud based on ERC-1400 smart contracts on the Ethereum blockchain.
The team
- defined requirements such as technical decisions, design, integration patterns and user journeys
- developed and deployed a full-feature tokenisation engine on the Ethereum blockchain
- created a user-friendly interface for users and administrators
- implemented a token lifecycle management system and tokenisation engine using the Solidity open source framework, integrated with the standard banking software Avaloq
- ensured compliance for VP Bank with the Liechtenstein regulatory authority
„The partnership between VP Bank and GFT was highly constructive and based on a strong sense of mutual trust, resulting in the development of a forward-looking solution that’s unique in asset management. We’ve successfully merged the real world with virtual worlds – in compliance with all banking standards.“
Benefit
An innovative service offering and new opportunities in the core business
VP Bank recognised the opportunities of tokenisation early on. To date, it is the only bank worldwide that digitises collectibles in a secure legal framework in the blockchain.
It has been successfully using the new software solution since late 2021 and has already tokenised a variety of paintings and watches, mapping them on the Ethereum blockchain. Private clients and intermediaries benefit not only from efficient, secure business processes, but also from more diverse investment options and optimised risk diversification.
Assets that were previously not bankable can thus be divided and transferred as desired. The assets are integrated directly into the bank portfolio, performance analyses and reporting, including tax reporting. They are also easy to manage via e-banking.
This provides a framework for holistic asset management with end-to-end compliance.
For VP Bank, tokenising assets opens a new door to opportunity in its core area of business, for example in inheritance and succession planning. The bank is also now in a position to venture into new fields of business, different asset classes and previously untapped customer groups such as galleries, art museums, art foundations and art-selling platforms.
Tokenisation is also an appealing proposition to artists, especially if they’re interested in selling artworks, in their entirety or divided into parts. It also paves the way for innovative art projects and collaborations. In early 2022, Art Basel organised an exhibition featuring an art collection that included both real and virtual versions of art in a high-resolution graphical metaverse, marrying traditional assets with modern innovation. Showcasing art in a digital context – in the form of a virtual art gallery in a metaverse – opens up a whole host of potential ideas, many of which will trickle down into the services offered by VP Bank.
VP Bank intends to continue on the path it has taken. With GFT, VP Bank wants to develop further token-based offerings for clients and offer its new services through its international operations. An important prerequisite for this is a secure legal framework in each of the regions its subsidiaries are based in (comparable to the Token Act in Liechtenstein). The bank also intends to expand its partner ecosystem, particularly in the areas of art valuation, lending against securities and logistics. It will thus play an active part in exciting art projects – partly because of the visual impact of art, but also for emotional reasons.
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Reference project
VP Bank and GFT tokenise physical collectors’ items, establishing a unique new service for customers
Blockchain legislation
The Token and Trusted Technology Providers Act (TVTG) – the ‘Blockchain Act’ – came into force in Liechtenstein on 1 January 2020. Aiming to create an „optimal, innovation-friendly and technology-neutral framework“ for trusted technology (VT) providers – such as VP Bank, a registered token issuer – it offers an unprecedented opportunity to innovate.*
* https://www.bitcoinsuisse.com/de/research/outlook/2020/regulatory-framework-tokenized-economy-tvtg-liechtenstein-2
GFT Switzerland
