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The digital assets division of the international bank wants to provide home loan-backed security tokens as collateral for the loan.
One of France’s leading banks has turned to decentralized finance pioneer MakerDAO to propose the submission of bond tokens as collateral for a loan of the DAI stablecoin.
The historic proposal called “Security Tokens Refinancing” was submitted to Maker’s governance forums by the international bank on Oct. 1. It would be the first major collaboration between a traditional bank and a DeFi protocol and could open the door for closer integration between the two sectors.
Societe Generale (SG) labeled it as the “first experiment at the crossroads between regulated and open source initiatives.”
The bank has proposed that it provides “OFH” security tokens (obligations de financement de l’habitat) which are characterized as covered bonds under French law, and backed by home loans.
These would be used to collateralize a $20 million loan in Maker’s DAI stablecoin which would be mediated by a number of legal entities and mature in six to nine months.
The Ethereum-based security tokens were issued in May 2020 with a nominal amount of 40 million Euro ($46.3M) and a fixed rate of 0%. They mature in May 2025 and have the top credit rating of AAA by rating agencies Moody’s and Fitch.
MakerDAO founder Rune Christensen said he had “no clue” about this proposal, adding that “this is one of multiple recent examples in Maker Governance of how the post-foundation model of organization is proving to be more scalable.”
Société Générale, the third largest bank in France, just made a collateral onboarding application to Maker for 20 million USD.— Rune Christensen (@RuneKek) September 30, 2021
Backed by EUR bonds, proposed by their blockchain subsidiary.https://t.co/hxGEMOIWjy
Industry observer “DCInvestor” commented on the potential impact of deals such as this on Ethereum and its position as a global settlement layer:
“Societe Generale with their attempt to get their on-chain assets usable in Maker and you're wondering if Ethereum will become a global settlement layer it's happening, now.”
SG stated that the loan would be a “pilot use case,” with the goal of helping to “shape and promote an experiment under the French legal framework,” and “enhance a profitable service and foster liquidity for digital bonds.”
SG Forge, a regulated subsidiary of the bank that deals with crypto assets, is managing the proposal which is based on the open-source framework CAST (Compliant Architecture for Security Tokens).
The legal framework for the deal is complex as it needs to integrate an institutional financial organization with a decentralized governance-based network. A flowchart provided by the bank details six separate entities involved in the process. These include the registrar Societe Generale Forge, the bank itself SG, MakerDAO, a legal representative for the DeFi protocol, security agent DIIS Group, and a third-party exchange agent.
Related: Senator Warren’s office confuses MakerDAO for failed 2016 project The DAO
Pseudonymous MakerDAO community member ‘PaperImperium’ commented on the proposal in the forum:
“Maker and SocGen-Forge are standing at the precipice of financial history. What a time to be alive.”
The proposal is currently being discussed and will move to a formal governance vote in the weeks to come.
It is not the first time Societe Generale has dabbled with Ethereum-based security tokens. In April 2019, the bank’s SG Forge unit issued a 100 million Euro bond as an OFH security token on Ethereum.
Quantum Economics founder Mati Greenspan has sounded the alarm over the damage the SEC’s case against LBRY could do to crypto.
Quantum Economics founder Mati Greenspan has warned the SEC’s latest action against decentralized content platform LBRY could threaten the future of all cryptocurrencies.
According to the complaint filed by the SEC on March 29, LBRY is alleged to have offered and sold millions worth of unregistered securities through LBRY Credit tokens since 2016. The company has disputed the SEC’s accusations, as they state their tokens are utility-focused and not for speculation.
In today’s newsletter, ominous titled “Don’t let them kill crypto,” Greenspan asserts that if the SEC’s lawsuit against LBRY is successful, it will have dramatic consequences:
“Should the court side against LBRY, it would literally put the future of all cryptocurrencies, including Bitcoin and Ether, in question.”
Greenspan notes that the U.S has fallen far behind on crypto regulation and warns this case could set a precedent of classifying "multifaceted programmable money" as securities.
“Judges generally take their guidance from previous rulings on similar cases, so a negative ruling here could make it easier for them to kill off any project which utilizes crypto tokens. DeFi, non-fungible tokens (NFTs), smart contracts, and just about everything except possibly stablecoins.”
Greenspan believes the platform's only crime was to set up in the U.S. and told Cointelegraph the case highlights the US’s “backwards approach to forward-looking innovation.”
Although the Isreal-based commentator doesn’t think an SEC victory would stifle innovation in the crypto industry overall, it will certainly do so in the U.S.:
“It will simply drive it out of the United States. Projects like this are flourishing in Europe and some parts of Asia and the technology continues to progress globally. America is being left behind.”
LBRY has contested the SEC case, arguing that while the “SEC claims that Credits have no use other than speculation,” the Credits actually allow users to tip, publish, purchase and boost content on the platform, and the company “at no time indicated that LBRY Credits were an investment, and consistently discouraged purchasing Credits for this purpose.”
Greenspan has urged readers of his newsletter to either write a letter to congress to show support of LBRY, or visit helplbrysavecrypto.com. to get more educated about the "idiotic actions of American regulators."
Despite sounding alarm bells over a negative outcome of this case, Greenspan told Cointelegraph he is optimistic:
“Hopefully, the judge will be able to see the blatant holes in the SEC’s case. LBRY seems to have some very sound arguments so I’m quite optimistic.”
Sumitomo Mitsui has partnered with Securitize to launch Japan’s first security token that complies with the country’s Financial Instruments and Exchange Act.
Japan-based bank Sumitomo Mitsui Trust Bank, or SMTB, has launched its first asset-backed securities token in partnership with Securitize on March 29.
The instrument is the first security token compliant with the Financial Instruments and Exchange Act (FIEA) to launch in the Japanese Market. The token has received an “a-1 rating” from Japanese rating agency, Rating and Investment Information, Inc, suggesting the product is very likely to fulfill its short-term obligations.
The token was created by tokenizing paper-based beneficiary certificates representing investor ownership to an underlying asset. SMTB has also created a trust company to manage its underlying securitized investments.
SMTB issued the product using Securitize’ security tokenization platform. Securitize was founded in the United States in 2017, before launching a Japanese division that secured investment backed from some of the country’s leading companies including Sony, SBI, and Softank.
In March 2020, Securitize partnered with Tokyo-based LIFULL to create a tokenized real estate investment platform.
In an announcement shared with Cointelegraph, SMBT’s Hirohito Niji expressed pride in the bank embracing digital securities, stating:
“We are committed to proactively develop and deliver innovative solutions to our customers with their changing needs by combining cutting-edge digital technologies and our conventional trust bank expertise.”
SMBT is a member of the Japan Security Token Association alongside local telecom giants NTT and Softbank. The firm first began exploring blockchain in October 2016, when they teamed up with IBM to explore using DLT to improve the efficiency of its asset management, real estate, and banking businesses.
Security token offerings, or STOs, have recently been gaining mainstream acceptance in Japan, with the country’s Financial Services Agency recognizing the Japan STO association in May last year.