French Bank Societe Generale Issues Bonds as Security Tokens on Blockchain

Societe Generale bonds security tokens ethereum blockchain

French banking group Societe Generale has completed a bonds issue worth $112 million on a platform powered by the ethereum blockchain, in a move that could shape further such capital issues in future.

The bonds were issued as a security token on the public ethereum blockchain, marking one of the first successful bond issues of its kind from a leading global bank.

According to a statement published by the bank this week, the tokens were issued in respect of covered bonds, a form of security that is backed by assets and recorded on the issuer’s balance sheet.

The bond issue was conducted internally, with Societe Generale effectively issuing the bonds to itself within its corporate group, as the sole investor in the bonds issue.

The bonds have a maturity date set five years ahead, with the option to extend that date by 12 months. The bonds have equal parity with other covered assets, meaning the holder is entitled to equal priority in the event of liquidation.

Ratings agency Moody’s described the model as “credit positive,” saying it reduces the scope for errors “arising from the complexity and the number of intermediaries involved in issuing covered bonds using traditional means.”

The model also increases transparency in the bond issuing process, particularly with ownership being recorded and tracked on the public ethereum blockchain.

In a statement, Societe Generale said issuing bonds on the blockchain was a more efficient process, with substantial added value over current bond issuing platforms.

“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 issue is far from the bank’s first experiment with blockchain technology, with Societe Generale involved in numerous other projects, including trade finance platform, and the launch of a blockchain-specific investment exchange traded note through subsidiary Kleinwort Hambros.

The move represents the latest step from a mainstream bank toward embracing blockchain and the process efficiencies afforded by the technology.