Societe Generale is proposing a historic $ 20 million loan to DAI in exchange for bond tokens

One of France’s leading banks reached out to decentralized finance pioneer MakerDAO to propose the presentation of bond tokens as collateral for a DAI stablecoin loan.

The groundbreaking proposal, called “Security Token Refinancing”, was presented to the Maker Governance forums on October 1st by the international bank. It would be the first major collaboration between a traditional bank and a DeFi protocol and could open the door to greater integration between the two sectors.

The Societe Generale (SG) called it “the first experiment at the interface between regulated and open source initiatives”.

Societe Generale is proposing a historic $ 20 million loan to DAI in exchange for bond tokens
Societe Generale is proposing a historic $ 20 million loan to DAI in exchange for bond tokens

The bank has proposed providing “OFH” security tokens (Financing obligations de l’habitat) which are referred to as Pfandbriefe under French law and are secured by home loans.

They would be used to guarantee a $ 20 million loan in Makers DAI stablecointhat would be brokered by a number of legal entities and that would expire in six or nine months.

Ethereum-based security tokens were issued in May 2020 with a face value of € 40 million ($ 46.3 million) and a fixed interest rate of 0%. They expire in May 2025 and have the highest credit rating of AAA from the rating agencies Moody’s and Fitch.

MakerDAO founder Rune Christensen said he “had no idea” about the proposal, adding that “This is one of many recent examples in Governance Maker of how the organizational model proves to be more scalable once it is established.”

The industry observer “DCInvestor” commented The potential impact of deals like this on Ethereum and its position as a global settlement layer:

â ???? Societe Generale is trying to harness its on-chain assets in Maker, which leaves you wondering if Ethereum is just becoming a global settlement layer.

SG stated that the loan was a “pilot use case” with the aim of “designing and promoting an experiment within the French legal framework”, and “improve profitable service and promote digital bond liquidity.”

SG Forge, a regulated subsidiary of the bank that deals with crypto assets, manages the proposal, which is based on the open source CAST framework. (Compliance architecture for security tokens).

The legal framework of the operation is complex as it has to integrate an institutional finance organization with a decentralized, governance-based network. A flow chart provided by the bank identifies six different entities that participate in the process. These include the registrar Societe Generale Forge, the SG-Bank itself, MakerDAO, a legal representative of the DeFi protocol, the securities broker DIIS Group and an outside stock broker.

Source: forum.makerdao.com

The pseudonymous MakerDAO community member ‘PaperImperium’ commented on the proposal in the forum:

– Maker and SocGen-Forge are on the verge of financial history. What time to be alive.â ????

The proposal is currently being debated and will be formally voted on by the government in the coming weeks.

It is not the first time that Societe Generale has dealt with Ethereum-based security tokens. In April 2019, the bank’s SG Forge unit issued a EUR 100 million bond as an OFH security token on Ethereum.

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