Societe Generale-FORGE Completes 7 Million DAI Drawdown from MakerDAO Protocol

MakerDAO, which claims to be the longest-standing DeFi lending protocol and creator of DAI, the original, decentralized stablecoin, announces Societe Generale-FORGE, a subsidiary of French multinational investment bank Societe Generale, has “completed an initial DAI drawdown from the MakerDAO protocol of 7 million DAI. SG-FORGE converted the DAI to fiat currency to offer Societe Generale a means of refinancing digital covered bonds (the OFH Tokens) on its balance sheet.”

As per MakerDAO’s over collateralization model, SG-FORGE’s DAI loan is “secured with an excess of collateral in the form of OFH Tokens issued by SocIete Generale SFH as a security token registered on the Ethereum public blockchain.”

The OFH Tokens are “covered bonds (rated aaa by Moody’s and AAA by Fitch) issued by Societe Generale SFH, backed by a pool of French home loans and guaranteed by Societe Generale (which is currently rated A by Fitch, A1 by Moody’s, and A by Standard & Poor’s).”

Sylvain Prigent, Chief Product Officer at SG-FORGE, said:

“This refinancing transaction is a prime example of SG-FORGE’s innovative approach to combining traditional capital market activities with the emerging and fast-growing DeFi ecosystem. It demonstrates the possibilities that lie at the crossroads between regulated and open-source initiatives. In addition to refinancing digital bonds held by Societe Generale and successfully integrating with one of the leading DeFi protocols, we are helping to shape and define the necessary legal, technical and operational frameworks to complete future DeFi to TradFi transactions.”

Initially proposed in 2021, “this first DAI drawdown by SG-FORGE is the result of multiple proposals and governance votes which were passed by MakerDAO governance.”

Maker becomes “the first DeFi protocol to refinance security tokens issued by a traditional, major, regulated bank.”

Societe Generale will “use the fiat currency secured through this DAI loan to refinance the OFH Tokens that it issued in May 2020, with the aim of fostering liquidity for these digital bonds and establishing a legal framework for deals of a similar nature.”

Annabelle Bernal, General Counsel at SG-FORGE said:

“The most innovative and challenging part for this refinancing structure, from a legal standpoint, was to apprehend the economic reality of a decentralized autonomous organization (DAO). The challenge was to define how to enter into a loan agreement, with a full legal and regulatory security. The success of this transaction is the first step that demonstrates that it is possible to capture this economic reality through legal concepts, and with the development of the DeFi ecosystem, traditional legal concepts could potentially evolve faster than anticipated.”

Sébastien Derivaux, Strategic Finance at MakerDAO said:

“This transaction represents Societe Generale’s first involvement with a DeFi protocol. Concluding this transaction with a subsidiary of the third largest bank in France by total assets, and one of the world’s most renowned financial services institutions, has been hugely informative for MakerDAO. The protocol is now equipped with the processes, legal frameworks and knowledge to enable more integrations with other leaders in banking. It marks a significant milestone in MakerDAO’s real-world asset strategy, as well as being a landmark in the merging of DeFi and TradFi to create a new era for finance.”

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