In April, Societe Generale SFH, a subsidiary of SocGen, sold EUR 100 million, or USD 112 million, of covered bonds (debt backed by mortgages) in the form of digital tokens – to itself. This could be huge news for digital assets.
The bond was issued as a security token on the Ethereum (ETH) blockchain, and earned the highest credit rating from Moody’s Investors Service and Fitch Ratings, according to SocGen. The company is one of Europe’s largest financial services organizations, with almost USD 2 trillion in assets, and 31 million customers in 67 countries.
Societe Generale FORGE, an internal startup launched through the bank’s intrapreneurship program, the Internal Startup Call, used this transaction in order to test if and how the crypto technology can be utilized for a more efficient way to issue bonds, to cut costs, improve product scalability, reduce time to market, and speed settlement for the securities. “This startup experiments disruptive business solutions using blockchain technology to develop new digital capital market activities,“ SocGen said.
Even though traditional finance firms are mostly mistrustful of digital tokens, crypto evangelists predict a wider use of security tokens offerings (STO). On the other hand, to the sceptics, STOs are just a way to inflate the crypto bubble.
“The proliferation of tokenization within finance will occur, but don’t expect to see it go mainstream anytime soon,“ Romal Almazo, who leads the crypto and blockchain practice at Capco, a financial-technology consultancy, told Bloomberg.
As reported, the STO market is estimated to grow this year, but at a steady rate – and the explosion might come some time until 2021, according to Carlos Domingo, founder and CEO of security token platform Securitize.
Richard Kemmish, the former head of covered bond origination at Credit Suisse Group AG, in an interview with Bloomberg asked “whether we are really ready for this”:
“One of the things that SocGen seem to have emphasized is improving settlement and clearing, but I’m not really sure how much of a problem or expense they are actually avoiding.’’
In either case, SocGen is no stranger to crypto-related projects. On April 18th, they’ve made an announcement that their we.trade, a blockchain-based trade finance platform, is now available to their clients in France. The bank calls it “the most advanced platform for digitalizing, securing and financing corporate trades”, which was produced in collaboration with tech giant IBM.
Furthermore, last September, SocGen was a part of the joint venture established by fifteen international financing, trading, and production institutions, called komgo SA, developed in partnership with the Ethereum-focused blockchain software technology company ConsenSys. The new platform is based in Geneva, Switzerland and aims to digitalize trade and commodities finance processes, while improving transparency and reducing the risk of fraud.