France’s third largest bank has borrowed $7 million in DAI stablecoin from DeFi protocol MakerDAO. Last year, Societe Generale created a vault on Maker that allows the bank to borrow up to $30 million in loans collateralized by bond securities.
Societe Generale, one of the oldest and largest banks in Europe, has made a withdrawal of 7 million DAI ($7 million) from its vault with MakerDAO, a decentralised autonomous organisation (DAO) that manages algorithmic stablecoin DAI.
The French investment bank’s digital asset-focused subsidiary, SG-Forge, was added to MakerDAO’s Real World Assets (RWA) vaults following a unanimous community vote held in July, 2022. At the time, the Maker community passed the proposal with 83.16% voting in favour and 16.84% abstaining from the vote. There were no objections to creating a vault for Societe Generale. The MakerDAO community was overwhelmed by the project as one member called it “a landmark in DeFi (decentralised finance) and showing how DeFi and TradeFi are merging together to create Finance 2.0.”
The RWA vault backed by $43 million euro bonds in the form of OFH tokens – which are Ethereum-based tokenized securities backed primarily by home loans, allows Societe Generale to borrow up to 30 million DAI in overcollateralized loans. The tokens issued by a credit institution affiliated to the French banking conglomerate, are based on an open-source framework called the Compliant Architecture for Security Tokens (CAST), which has been used by the Bank of France and the European Investment Bank on both Ethereum (ETH) and Tezos (XTZ) blockchains.
Unlike MakerDAO’s other RWA Vaults that have assets backing the borrowed DAI and can be liquidated automatically in the case the loan becomes undercollateralized, OFH tokens do not have a liquid market. Hence the liquidation process has to be done manually.
SG-Forge first laid the foundation for its lending partnership with MakerDAO in October 2021, when it borrowed $20 million worth of DAI for a period of six to nine months and converted the funds to US dollars, which was then loaned to parent bank Societe Generale in exchange for the OFH tokens. This was the first time a refinancing operation was conducted on a public blockchain between a centralised and decentralised institution.
A number of MakerDAO delegates were quick to point out that as is the case with most RWA Vaults, SG-Forge was slow to make its first withdrawal, but they expect the investment bank to withdraw its maximum available credit in the coming months.
Last October, French financial markets regulator, Autorite des Marches Financiers (AMF), granted the country’s third largest bank with a licence to provide crypto asset-related services under its Virtual Assets Service Provider (VASP) ruling. The licence will allow Societe Generale to custody, buy, sell and trade cryptocurrencies under its digital asset subsidiary – SG-Forge. The bank’s securities division also began offering custodial services for asset managers interested in developing crypto-based exchange traded products (ETP).
Maker’s partnership with SG is seen as a move to increase the collateral base of DAI stablecoin by diversifying its portfolio of backing assets which is currently dominated by volatile crypto assets like Ether (ETH) and Circle’s USDC stablecoin. The DeFi protocol also plans to invest $500 million DAI into U.S treasury bills and corporate bonds.
At the time of writing, MKR, the native token of Maker, is trading at $652.83 – up by 2.9% in the last 24-hours.