Societe Generale, one of the biggest bank in Europe and the world, has announced they have issued collateralized corporate debt offerings on ethereum’s public blockchain.
The bank said on the 18th of April 2019 a subsidiary issued €100 million of covered bonds (“obligations de financement de l’habitat” or “OFH”) as a security token, directly registered on the Ethereum blockchain.
OFH Tokens have been rated Aaa / AAA by Moody’s and Fitch and have been fully subscribed by Societe Generale, they say.
We found two smart contracts that might be relevant. One of them is by BIC, a French company that does pens, lighters and other disposable items with yearly revenue of circa €2 billion.
The contract code is not easily viewable, but it looks like they’ve created a token, given it a name, and that’s pretty much it.
In return for this token presumably fiat is sent to the bank, with the token now entitling you to receive back whatever loaned fiat amount corresponds to 1 BIC.
It is probable that this is all in addition to more traditional methods of signed contracts or database accounts and so on, but there is little reason why this token itself can’t be the beginning and the end of the debt ownership.
The main difficulty for now would be securing the token, but people secure their bitcoin, eth, so the more conceptual difficulty is how you pay back the debt.
The solution there can be quite simple. You just give the token back to the bank or the corporation and redeem it.
The benefit of all this would be liquidity because the bond can be sent anywhere in seconds and thus can be exchanges 24/7.
The other benefit would be access to a far wider market. Millennials for example probably have no clue how to buy a corporate bond with all sorts of archaic processes and minimum purchasing amounts and so on.
They all however know how to log into Coinbase or Binance or wherever and pretty much instantly buy or sell whatever they want.
The other smart contract has Societe Generale’s own name, but anyone can enter any name for a token, although why would they choose Societe Generale.
The other aspect here is that the dates are a bit off. Close to 14 days ago would have been April 10th rather than April 18.
The ticker here seems to be Societe Generale SA, the subsidiary that issued the bond. That means for this smart contract and assuming it is indeed by Societe Generale, they’ve issued a collateralized debt bond to raise money for themselves.
The same as above applies here too, but there’s another very interesting aspect because we can suggest the BIC bond above could have been issued by BIC itself without having to go through the bank.
Now there are probably all sorts of regulatory aspects etc., but from a technical perspective and from a conceptual perspective, while a paper bond does need a bank to keep accounts, a blockchain bond doesn’t need a bank because the ethereum network keeps accounts.
So in this brave new world Societe Generale would be reduced to being more of a consultant rather than a bank, although there could be many financial services, including custody of these tokens and perhaps redemption.