Bond Tokens To Secure SocGen Bank’s $20M Loan by DeFi Platform MakerDAO

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societe generale makerdao loan

SocGen Bank is collaborating with MakerDAO on a step towards institutional adoption. The MakerDAO loan will be the first time a major financial institution uses a DeFi platform to secure a loan.

One of the largest French banks is collaborating with one of the largest protocols in DeFi on an important step towards institutional adoption.

Société Générale (SocGen), the French multinational bank, submitted a request on Thursday for MakerDAO to accept on-chain bonds it issues as collateral for a stablecoin under MakerDAO’s decentralized finance platform (DeFi).

As part of a somewhat complex legal architecture, the loan would be mediated between a number of companies and third parties and could amount to $20 million in DeFi – the largest step towards institutionalizing DeFi to date.

Forge, a “regulated subsidiary” of Société Générale that specializes in digital assets, filed the application. Having issued bond-backed tokens on the Ethereum blockchain two years ago, SociGen has been a leader in the development of blockchain assets for years.

SocGen’s collateral tokens were issued in 2020, carry an interest rate of 0%, and mature in 2025. Bond tokens and DAIs are recognized by French law and have AAA ratings from rating agencies Moody’s and Fitch.

Societe Generale specifies in its proposal that the loan is a “pilot use case,” and that one of the goals of the project is to “help shape an experiment within the French legal framework.”

Legal Structure

Given both teams’ smart contractual expertise, Organizing the legal framework seems to be what stands in the way of the application, since conflicts can arise when real-world organizations attempt to interact with on-chain, self-governing systems.

In the proposal, a flowchart shows six entities: SocGen; SocGen Forge; MakerDAO protocol; DIIS Group, which will act as Maker’s “security agent,” required under French law to enforce the terms of the loan on the real-world side. MakingDAO has yet to appoint a legal representative; and there is yet to be named a third party that will facilitate the conversion of DAI loan funds into dollars, likely either a custodian service or a centralized exchange.

MakerDAO contributor “PaperImperium,” a pseudonym, told CoinDesk it has a number of options when it comes to choosing its legal representation.

We have been experimenting with several legal entities, including the Maker Representative. I’m not sure which one we’re picking, but we have options for structure and jurisdiction, he wrote on Twitter.

Creator made headlines by releasing a $38,000 loan in April to finance real-world mortgages. The firm has also partnered with Tinlake and Centrifuge to explore other real-world options.

Referring to the Russian astronaut who was the first man in space, PaperImperium described the application by saying this was the next logical step in MakerDAO’s mission to integrate the crypto and real-world economies. Their first experiments with home loans in April were akin to Sputnik, and the SocGen-Forge proposal is akin to Yuri Gagarin.

He went on:

“From here, the next goal is the moon.”

MakerDao’s Core Units

Members of the DAO’s Growth core unit first arranged the deal and the Real World Finance core unit will handle the bond repo’s preparations and operations, according to PaperImperium. Following the dissolution of the Maker Foundation in July, “core units” were created as decentralized entities with budgets provided by MakerDAO.

In an interview with CoinDesk, PaperImperium, who represents about 3% of the token voting power, said that the deal had been in the works since 2020.

By the time of publication, SocialGen had not commented.

MakerDAO’s chief of Real World Finance, Sébastien Derivaux, wrote in a reply to the proposal that the venture “does not have a good risk/reward profile, noting that it would require significant development resources to succeed.

Nonetheless, he stated that the ancillary benefits of the proposal – namely, being able to accept other real-world bank bonds – outweighed any necessary time and effort.

It should be viewed as the first step in integrating all public bonds (that will be on Ethereum, as we all know) and providing repo. That’s a huge market!, he explained.

In the coming weeks, the proposal will move from the discussion phase to a formal vote.

Initially published here.


Chris Munch

Chris Munch is a professional cryptocurrency and blockchain writer with a background in software businesses, and has been involved in marketing within the cryptocurrency space. With a passion for innovation, Chris brings a unique and insightful perspective to the world of crypto and blockchain. Chris has a deep understanding of the economic, psychological, marketing and financial forces that drive the crypto market, and has made a number of accurate calls of major shifts in market trends. He is constantly researching and studying the latest trends and technologies, ensuring that he is always up-to-date on the latest developments in the industry. Chris’ writing is characterized by his ability to explain complex concepts in a clear and concise manner, making it accessible to a wide audience of readers.