Third largest French multinational bank and financial services provider Société Générale or SocGen submitted a $20M Maker DAO proposal on Sep 30, again reinforcing Ethereum role as the global settlement layer. The collateral on-boarding application sent to Maker DAO decentralized governance titled [Security Tokens Refinancing] MIP6 Application for OFH Tokens relates to security token refinancing. It notes the following “This first experiment at the crossroads between regulated and open source initiatives, as described below, is intended to refinance a Covered Bond Token that has been issued last year on the Ethereum public blockchain. We let you take into consideration all the details, and we look forward to receiving your feedback. Thank you.“
What will Societe General do?
Basically, Société Générale intends to refinance the covered bond tokens that it issued last year on the Ethereum blockchain. However, this isn’t the first time that activity of this sort is happening on the Ethereum blockchain. In 2019, the Société Générale issued security tokens worldwide under OFH tokens by SG SFH worth €100,000,000. Last year, the first settlement in Central Bank Digital Currencies (CBDCs) took place when OFH tokens by SG SFH worth €40,000,000 were settled in partnership with Banque de France.
This year, the European Investment Bank (EIB) issued bond tokens worth €100,000,000 again settled in CBDCs in partnership with the Banque de France on Ethereum. Société Générale also issued €5,000,000 issuance of notes tokens on the Tezos blockchain. These OFH tokens aren’t traded publicly, but rather through the over-the-counter (OTC) route. It appears that blockchain platforms are finally moving past the speculation phase and acquiring real-world usage now.
Further Partnerships and Enhancements
The proposal further reiterates that Société Générale intends to set up the legal structure for refinancing, wishes to experiment further with accounting and operational principles in this new space, seeks integration with one of the largest DeFi protocols on Ethereum, further security tokens usage on the blockchain and enhance liquidity for digital bonds. The $20M DAI loan taken against the OFH tokens for refinancing have a maturity period of 6-9 months and if approved would allow Maker DAO to have a different class of non-volatile collateral asset, apart from it’s usual cryptocurrencies basket.
Ethereum will benefit from this new traditional finance usage of its block space, which will further cement its place as the global settlement layer – a place where final settlements of all accounts are made. The world’s computer already holds the record as the blockchain generating the most fees and settling the most use. Société Générale continued usage of Ethereum and the Maker DAO DeFi protocol is a testament to the platform’s credible neutrality and security.