Saturday, May 30, 2020

Societe Generale, French Lender Issues $112 Million Bond on Ethereum’s Blockchain

Top France financial service firm, Societe Generale Group, has issued about €100 million ($112 million) bond as a security token on the ethereum blockchain. This was announced on the website of Societe Generale on the 23rd of April.

$112 Million Bond on Ethereum Blockchain

The bond is a pilot project issued by Societe Generale SFH, a subsidiary of one of Europe’s largest financial services groups, Societe Generale Group, in collaboration with Societe Generale FORGE, an internal startup of the group. The bond is a type of security that is backed by specific assets but remains on the issuer’s balance sheet.

Also, the big four professional-services firm PwC advised the project on the technology and the French law firm Gide Loyrette Nouel was a legal advisor.

The firm noted that the live transaction offered by the blockchain tech explores a more efficient process for bond issuances. The firm explained in the announcement that “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.”

Rating Agency Report On Societe Generale Bond

Also, the report of a bond rating agency, Moody’s Investors Service that was released on Tuesday shows that the Societe Generale was the sole investor. This means that the firm issued the securities to itself and no outside buyers were involved.

According to Moody’s report, the bond has a five years maturity period with a 12 months extension. It is also on equal footing with other covered bonds of the issuer. This means that if the company were to fail, whoever held the tokens at the period would be repaid the same fractional amounts at the same time as regular bondholder according to the report.

The rating agency rates the bond high as “credit positive” for the issuer due to its use of blockchain technology. The use of the blockchain technology is more favoured because of increased transparency and a reduced likelihood of errors which usually arises from the complexity and the number of intermediaries involved in issuing covered bonds using traditional means.

Societe Generale and Blockchain Tech

This is not the first time Societe Generale will be exploring blockchain technology. In 2017, it was a founding member of IBM-powered trade finance platform and in 2018 commodity trading platform Komgo SA.

Likewise, earlier in April, Societe Generale-owned private bank and wealth manager Kleinwort Hambros announced it had launched an exchange-traded note (ETN) with a focus on investing in blockchain companies.

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