The blockchain bug seems to have bitten French banking giant Societe Generale to a point of no return. A little over a year ago, the third largest bank in France by assets unveiled a blockchain-based trade finance platform for all its corporate clients, the we.trade platform.
Now Societe Generale has found another use case for blockchain technology – bond issuance.
In a statement, the giant lender has revealed that its covered bond unit, Societe General SFH, has issued its first covered bond on the Ethereum blockchain worth over $110 million. The security tokens have been awarded a triple A rating by Fitch and Moody’s.
Societe Generale: Faster and Cheaper Bond Issuance
Per the statement, this was an experiment aimed at developing ‘new digital capital market activities’. Among the benefits Societe Generale expects to derive from issuing bonds on a blockchain include ‘product scalability and reduced time to market’.
Additionally, transparency and settlement speeds will be enhanced while reducing costs and cutting the number of intermediaries.
While the security tokens are backed by particular assets, they will remain on the balance sheet of the giant lender. The pilot project was led by an internal startup known as Societe Generale FORGE.
Issuing Bonds on Ethereum Blockchain no Longer a Novelty
Bond issuance on a blockchain by legacy institutions and governments may have seemed a big deal in the past. That is no longer the case currently. In the future, the rate of adoption of blockchain-based open finance is expected to grow even faster.
Societe Generale issued the first covered bond (100m EUR) as a security token on the Ethereum public blockchain.
Open finance is for everyone, even legacy financial institutions.
Expect these announcements to pick up considerably over the next few years. https://t.co/oiPHMqyobb
— Spencer Noon (@spencernoon) April 23, 2019
As proof of this, the Asia Times reported that Afghanistan and Tunisia were on a path to issuing sovereign bitcoin bonds. Per the publication, the Central Bank of Afghanistan’s governor, Khalil Sediq, had confided that they were considering raising $5.8 billion by issuing a sovereign crypto bond. This was revealed during an IMF and World Bank event in Washington.
Similarly, the governor of Tunisia’s central bank, Marouane El Abassi revealed that a blockchain working group had been created. This was with a view of looking into issuing a sovereign Bitcoin bond.
First Global Ethereum Blockchain Bond
Last year in August the World Bank launched a blockchain operated debt instrument managing to raise approximately $77 million (A$110 million).
— alexandra klopfer (@aklopfer_dc) August 23, 2018
In the project, the Commonwealth Bank of Australia was picked by the World Bank as the arranger of the bond.