According to a press release, several significant French financial institutions have come to decentralized finance pioneer MakerDAO. It is specifically to propose the submission of bond tokens as collateral for a loan of the DAI stablecoin.
Securing the $20 million loan in DAI
On Friday, the international bank presented the historic proposal. It is the Security Tokens Refinancing, to Maker’s governance forums, marking the first time of submitting such a request. A traditional bank and a DeFi protocol would collaborate for the first time. Also, it might pave the way for further integration between the two sectors in the future.
Societe Generale (SG) described it as the first trial at the intersection of regulated and open-source efforts in a press release.
Under French legislation, “obligations de financement de l’habitat” (OFH) security tokens are classified as covered bonds and backed by home loans. Specifically, it is a recommendation as a solution by the bank.
These assets would be used to secure a $20 million loan in Maker’s DAI stablecoin. The loan would be administered by several legal organizations and would mature in six to nine months.
The proposal
MakerDAO creator Rune Christensen said that he has no idea what this proposal is. He went on to say that this is just one of many recent cases in Maker Governance. Describe how the post-foundation form of organization proves to be more scalable.
Initially released in May 2020, the Ethereum-based security tokens have a nominal value of 40 million euros ($46.3 million) and a zero percent set interest rate. They are due to mature in May 2025. It is also the highest possible credit rating of AAA by the credit rating organizations Moody’s and Fitch.
Based on the open-source framework CAST, SG Forge manages the proposal, a regulated subsidiary of the bank that deals with cryptocurrencies and other digital assets (Compliant Architecture for Security Tokens). According to SG, the loan would be a pilot use case to assist in shaping and promoting an experiment under the French legislative framework. It should enhance a lucrative service, and foster liquidity for digital bonds, among other things.
Societe Generale’s security tokens
Additionally, the legal structure for the transaction has complications. Since it requires integrating an institutional financial organization with a decentralized governance-based network of organizations. The bank supplied a flowchart that illustrates the six different entities involved in the process. Certainly, the registrant Societe Generale Forge, the bank itself, SG, MakerDAO, a legal representative for the DeFi protocol, the security agency DIIS Group, and a third-party exchange agent are participating in the project.
A formal governance vote on the plan will occur in the coming weeks once it has been studied and debated.
It is not the first time that Societe Generale has experimented with security tokens based on the Ethereum blockchain. The bank’s SG Forge unit issued a 100 million Euro bond in the form of an OFH security token on the Ethereum blockchain in April 2019.
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