Societe Generale, one of the largest banks in Europe, announced it has successfully issued the first covered bond, worth 100 million euros ($112 million) as a security token on a public blockchain, the bank said in a statement.
The aim of the project is to test how emerging technology can improve the existing technology so that is cuts costs and speeds settlement for the securities. The French bank has reportedly more than $1.5 trillion of assets under its administration.
“Many areas of added value are predicted, among which, product scalability and reduced time to market, computer code automation structuring, thus better transparency, faster transferability and settlement. It proposes a new standard for issuances and secondary market bond trading and reduces cost and the number of intermediaries, it is said in the statement.
Societe Generale SFH, a subsidiary of Societe Generale specialized in credits, issued covered bonds, which is essentially a debt backed by a mortgage, on the Ethereum blockchain. The bank received the “Aaa / AAA” rating by Moody’s and Fitch. As a result, the French bank was the only buyer of bonds issued by its subsidiary.
“The proliferation of tokenization within finance will occur, but don’t expect to see it go mainstream anytime soon. This market will take years to properly mature and evolve,’’ said Romal Almazo, head of the blockchain unit at Capco, to Bloomberg.
The bond issuance process on a public blockchain, implemented by Societe Generale SFH, stems from the bank’s “Internal Startup Call” program, which will “enable disruptive internal intrapreneurial projects to emerge that will be the embryos of our future products and services, including projects that go beyond traditional banking services.”
This process was initiated by Societe Generale FORGE, one of the 60 startups launched via the Internal Startup Call. The bank notes in the statement that FORGE is focused on “disruptive business solutions using blockchain technology to develop new digital capital market activities”.
This news came a few days before it emerged that Belarusian government plans to issue a tokenized version of its bonds. All interested parties will be enabled to use fiat or digital coins, bitcoin and ether, to invest in and trade Belarusian government bonds.
In a similar manner, the Austrian government issued 1.15 billion euros ($1.29 billion) of government bonds on the Ethereum public blockchain.
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