About the author

Graeme Moore is the Head of Tokenization at the Polymesh Association, a not-for-profit dedicated to the growth of the Polymesh blockchain ecosystem.

On Tuesday, March 28th, French authorities raided the Paris offices of five major banks—including HSBC, BNP Paribas, and Société Générale—in relation to an ongoing fraud and money laundering investigation where authorities are reportedly looking to collect at least €1 billion.

The investigation centers on dividend payments; asset custody; centralized, opaque record-keeping systems; and tax avoidance strategies.

When a dividend is paid to a shareholder, the shareholder must pay the associated taxes on the dividend. But… who is the actual shareholder that receives the dividend? In the legacy world of opaque, closed, centralized databases it can often be difficult to determine. The shareholder that is owed the dividend is recorded before the “ex-dividend” date. If you are the shareholder before the ex-dividend date, you are entitled to the dividend and therefore required to pay the taxes.

France’s Parquet National Financier (PNF) fraud office alleges that the French banks provided a service to their favorite and largest foreign clients where they would temporarily transfer shares owned in foreign client accounts to separate French (i.e. non-foreign) accounts to lower their client’s tax burden.


Since a bank with a closed, opaque, centralized database is able to maintain inconsistent records, they can know that their foreign client really owns a share of a company, while temporarily pretending that they own that share of a company for tax purposes.

Here's how it works: The foreign client owns a share. The French bank pretends instead that they own the share for 1 day before the ex-dividend date. The French bank receives the dividend payment instead of the client. The French bank pays the reduced (non-foreign) taxes. The French bank sends the dividend to their foreign client. The foreign client now owns the share again (until next time). Everyone is happy… except, of course, the tax collector.

Fraud of this type is very simple to conduct in legacy financial markets. There is no single golden source of truth to determine who owns a share at a specific point in time—and much of these systems rely on trust, as in the case of when Dole was sued by more shareholders than it actually had.

But—to use a familiar phrase—blockchain fixes this.


With a single source of truth in the form of a public, verifiable, write-only database, shareholders, capital markets intermediaries, and regulators can always have real-time access into financial markets including ownership data, custody relationships, and tax obligations.

For example, with a blockchain purpose-built for capital markets, user 0x123abc clearly and transparently owns a share on-chain, its custodian 0x456def receives a dividend on behalf of 0x123abc on-chain, and 0x456def automatically pays tax on behalf of 0x123abc on-chain. Blockchain eliminates the “double-own” problem, streamlines back-office processes, eliminates inconsistencies in ownership records, and increases tax collection while clamping down on fraud.

People in crypto love to talk about “The Flippening”. This originated from a belief that Ethereum’s market cap will eventually grow larger than Bitcoin’s and “flip” it. But there are other flippenings as well: Bitcoin’s market cap vs. gold, transactions on blockchains vs. banks and credit card networks, and layer 2 volumes vs. layer 1 volumes.

But one of the lesser discussed yet more interesting flippenings is when regulators and governments stop fearing blockchain technology for its disruptive, unknown nature, and begin harnessing it to improve markets, increase trust, and better enforce regulations.

One day soon, all financial securities will be required to operate on blockchains. And that’s because blockchain really does fix this.

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