Societe Generale SA (SocGen) Processes Sale of Covered Bonds with Digital Currency

  • 100 million euros worth of covered bonds were sold as digital tokens by the Societe Generale SA bank.
  • Romal Almazo, Richard Kemmish, and Graham Rodford speak on affect that tokenizing assets will have on traditional finance.

Cryptocurrencies are constantly being integrated for new purposes, as the financial institutions of the world seek out ways that they can use these digital assets to their advantage as well. In a recent report from Bloomberg on May 9th, it looks like a sale of 100 million euros of covered bonds recently was sold as digital tokens with a unit of Societe Generale SA.

The goal of this “internal startup” was to see how the tech uses for cryptocurrency could be adapted for lower costs and faster payment settlements.

The majority of firms in traditional finance have been hesitant to adopt any variation of crypto, though there’s analysts in the market that believe the key to gathering momentum will be found in digitizing assets like stocks and real estate. Ultimately, digital asset firm Finoa of Berlin says that the asset class could be valued at $24 trillion in the next ten years.

Romal Almazo, the leader of crypto and blockchain at fintech company Capco, sai:

“The proliferation of tokenization within finance will occur, but don’t expect to see it go mainstream anytime soon.” He added that the market will likely “take years” to reach the level of maturation necessary to reach mass adoption.

Covered bond yields

SocGen has yet to reply to requests for comment from Bloomberg, in regard to the transaction. Last month, the bank had said that they had established a security token that “explores a more efficient process for bond issuance,” and is registered through the Ethereum blockchain. Furthermore, the security has already earned the highest credit rating possible through Moody’s Investors Service and Fitch Ratings.

Usually, after the date that the corporate bond is executed, the settlement process takes 2 days.

Bloomberg states that the bonds could ultimately be the best place to test out securities tokens, considering the regulated status of the financial entities. Still, it is worth noting that there’s certain limitations that arise with covered bond issuers, according to the former head of Credit Suisse Group AG, Richard Kemmish.

Kemmish doubts if the public is actually “ready for this,” as he puts it. He said that one of the focal points for SocGen has been the way that cryptocurrency can improve the settlement and clearing process. However, he added:

“I’m not really sure how much of a problem or expense they are actually avoiding.”

Most skeptics of the market believe that security token offerings (STOs) are basically a way to try to inflate cryptocurrency as an industry after the bubble burst last year. Entrepreneurs are attempting to use security tokens to convert nearly anything into a tokenized asset, though proponents of the market believe that investors will be able to get into the market more easily with these processes.

CEO and co-founder of Archax Ltd., Graham Rodford, believes that there will be a time when every possible item will be tokenized. However, as he points out:

“it’s not just about allowing previously illiquid assets to be traded, like shares in a private equity fund, but it will also bring great efficiencies to existing traditional markets.’’

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