FEATURE | Q&A
SG Forge: Blockchain structured products issuance inches closer to mainstream Société Générale saw a strong acceleration of clients adopting blockchain technology in capital markets through digital native securities in 2021.
At the same time, Société Générale – Forge launched as a subsidiary of Société Générale to transact these financial instruments, and to perform those operations on the blockchain as a proper legal and regulated entity. “In 2021, we really focused on aligning the platform with our core banking activities which means that when you transact securities you have to meet compliance and regulatory requirements – the technical requirements needed to be properly set up and organised,” says Stenger. “Now that we have completed the foundational stage, we are working on making those products tradable for our clients, building everything around the product, and providing the infrastructure for clients to transact the products in the same way they buy and sell securities today.” What does the Luxembourg Exchange listing mean? What next?
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arlier this month the Luxembourg Stock Exchange (LuxSE) admitted for trading for the first time three series of security tokens including digital covered bonds (OFH Tokens) and structured products issued by Société Générale’s digital assets arm, Société Générale - Forge (SG - Forge), natively on the Ethereum and Tezos public blockchains. SRP caught up with SG – Forge’s chief executive Jean-Marc Stenger (below-right) about the future of distributed ledger technology (DLT) in the structured products market, the adoption of digital asset securities and the challenges ahead. The French bank started in 2019 and 2020 issuing simple financial instruments - plain vanilla bonds - on these blockchains which required building the core package, and the internal systems to manage those financial instruments. “The next step was to add more complex products – the proof of concept came last year when we issued the autocall linked to Ethereum,” says Stenger. “This required a lot of work around the legal framework, and documentation requirements, but also to make sure these instruments were treated in the same way as traditional instruments are treated under Solvency 2.”
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Jean-Marc Stenger: The three products we listed on the Luxembourg Stock Exchange were the two covered bonds and one structure product previously issued. The listing is not really to focus on the products themselves but about proving our ability to bring those products to a stock exchange and meet the rules and specific guidelines that apply to digital assets. A second aspect, which is probably just as important, is that this announcement has to be read in conjunction with the work which is currently being done at an EU level under the Security Token Pilot regime which expected to come into force towards Q4 this year. The pilot regime specifically for security tokens will introduce different exemptions to current EU regulations, notably, the Central Securities Depositories Regulation (CSDR). We are also developing refinancing solutions with all those digital assets to clients. Is the Decentralised Finance (DeFi) market fragmented in terms of regulation? Jean-Marc Stenger: We are dealing with investors and
