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For the first time ever, Societe Generale issued covered bonds in a form of security token on a public blockchain. This way the company wanted to experiment with business blockchain-based solutions and investigate efficient ways for bond issuance.
Societe Generale SFH, a subsidiary of the French investment banking giant Societe Generale Group, has issued covered bonds (obligations de financement de l’habitat or OFH) worth of $112.12 million on the Ethereum blockchain. Rated by Moody’s and Fitch rating agencies as Aaa/AAA, the tokens have been fully subscribed by Societe Generale.
This is the first time covered bonds (debt securities issued by a financial institution and collateralized against assets) are issued as a security token on a public blockchain.
The project has been conducted by Societe Generale and its blockchain subsidiary Societe Generale FORGE launched via the Internal Startup Call. PwC consulted the project on the technical aspects and French law firm Gide Loyrette Nouel provided advice on legal aspects.
The announcement of Societe Generale reads:
“This live transaction explores a more efficient process for bond issuances. 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.”
According to the company, the goal behind the project was to experiment with different technologies and business solutions based on blockchain, develop digital capital markets activities and investigate efficient ways for bond issuance.
Societe Generale said that there are numerous opportunities for many areas of added value such as product scalability, reduced time to market, and computer code automation structuring, which leads to better transparency, faster transferability, and settlement.
Societe Generale said:
“It proposes a new standard for issuances and secondary market bond trading and reduces cost and the number of intermediaries.”
The company added:
“Innovation is at the core of Societe Generale’s DNA and a priority of its Transform to Grow strategic plan.”
Societe Generale’s Crypto Experience
Societe Generale has been involved in crypto activities for several years. Earlier, the company worked on the we-trade finance platform based in blockchain technology that is available to all corporate clients in France.
In 2018, Societe Generale became a founding member of the commodity trading platform Komgo SA that aims at digitalizing the trade and commodities finance sector through a blockchain-based open platform.
Earlier this month, Societe Generale Private Banking announced the launch of a new Luxembourg-listed, actively managed exchange-traded note (ETN) aiming to target the blockchain sector. The ETNs are available exclusively to existing and prospective clients.
Currently, they have 20 stocks diversified across areas including technology, shipping, oil and gas, custody and industrials. The initial basket of stocks included companies carefully selected to benefit from the potential growth of blockchain, either through the sale of software services or through the improvement in margins that the installation of blockchain technology may produce.
* To find out all the information about security tokens, please check out our “What are Security Tokens?” guide.