One of France’s top banking powerhouses has turned to the Ethereum network to release bonds in the form of security tokens.
Societe Generale, or SocGen as it’s commonly referred to in France, is presently the 19th largest in the world, the sixth largest in Europe, and the third largest in its home country. On April 23rd, the firm announced it had issued €100 million EUR in bonds — formally called “obligations de financement de l’habitat” — as security tokens, or OFH tokens, via Ethereum.
The initiative comes as part of a collaboration between SocGen Group and in internal startup at the bank, Societe Generale FORGE, with the latter being focused on “using blockchain technology to develop new digital capital market activities.”
One of the biggest banks in France, Societe Generale, just issued the first covered bond (worth EUR 100m) as a security token on the public Ethereum network 🚀
— Anthony Sassano | sassal.eth (@sassal0x) April 23, 2019
Notably, and toward that last point, the bank cast the pivot to a security token model as one that could improve upon various aspects of the bond issuance process in traditional markets:
“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.”
The use case is the latest institutional example of what the Ethereum network is being focused toward, namely becoming next-generation public infrastructure for commerce and beyond.
And if this tokenization effort can achieve the bond improvements that SocGen is touting, other mainstream banks will be sure to follow. The OFH tokens are mainstream themselves, with the bonds having been given Triple A ratings from top credit rating agencies like Fitch and Moody’s.
Bonds are used to raise capital, but creating them has been a paper-intensive process hitherto. If the march of tokenization continues on, then bonds as security tokens may simply become the status quo.
Keeping the STOs Coming in Europe
SocGen’s issuance of the OFH tokens is the latest security token offering (STO) in Europe, but it’s not the first this year.
Last month, cryptocurrency lending firm Bitbond released Germany’s inaugural STO in its Bitbond Token (BB1). Unlike the loan-like structure of SocGen’s bonds, the BB1 token, which has a lifespan of 10 years, gives its holders rights to Bitbond dividends.
Also unlike the OFH tokens, the BB1 was built atop the Stellar platform rather than Ethereum. On their token’s landing page, the Bitbond team explained their rationale for picking the former:
“With a processing capacity of over 1,000 transactions per second, transaction costs at a fraction of a cent, a built in decentralized exchange and a global network of active partners using the platform, Stellar is one of the most efficient blockchains for payment processing and token issuance.”
On a related note, German fintech startup wevest AG declared last week that it would also be relying on the Stellar platform in order to facilitate the company’s own security token operations.
“The efficiencies Stellar provides will be instrumental in furthering wevest’s mission to help SMEs [small and medium-sized enterprises] gain access to equity financing,” the company said.
The Bitbond and wevest Stellar embraces show that Ethereum will not go unchallenged in the cryptoeconomy as the stakes of enterprise token efforts continue to increase around the globe. Though for now, Ethereum is still the most popular blockchain project for issuing tokens.
Wherever the tokenization rat race goes from here, European states have generally been more less strict on security tokens than the United States, where the leadership of the U.S. Securities and Exchange Commission (SEC) has suggested it sees most token projects as securities.