• The Investment Banking Giant Wants to Borrow From MakerDAO

  • Société Générale, a French investment bank, has proposed using its securities to make loans through MakerDAO. The Proposal entails creating OFH tokens that represent covered bonds and depositing them in Maker’s vaults. If approved, the transaction would be the first of its kind involving a DeFi protocol and a traditional investment firm.

    One of Europe’s largest investment banks, Société Générale, has approached the MakerDAO community to refinance its securities. The bank intends to use covered bonds as collateral when obtaining Dai stablecoin loans through the protocol.

    MakerDAO is where DeFi meets TradFi.

    MakerDAO is on the verge of making financial history.

    Societe Generale-Forge (SG-Forge), a subsidiary of the French investment bank Société Générale, submitted a proposal to the MakerDAO community on Thursday outlining plans for refinancing covered bonds via MakerDAO’s vaults. If approved, the transaction would be the first of its kind involving a DeFi protocol and a traditional investment firm.

    The SG-Forge proposal involves the creation of “OFH tokens,” which are Ethereum blockchain securities that represent covered bonds backed by home loans. The bonds backing the OFH tokens have been rated aaa by Moody’s and AAA by Fitch, indicating that they are creditworthy and have a strong ability to repay investors.

    The OFH tokens will be created using the Compliant Architecture for Security Tokens (CAST), the same framework that Société Générale used earlier this year to launch tokenized debt on the Tezos blockchain.

    Once SG-Forge has created the OFH tokens, they will be deposited in MakerDAO’s vaults, allowing the company to take out an overcollateralized loan of Dai stablecoins with a maturity of six to nine months.

    MakerDAO token holders, like previous Maker Improvement Proposals (MIPs), will have the final say on whether or not the DAO will proceed with SG-plan. Forge’s

    MakerDAO is a decentralized autonomous organization (DAO) that is responsible for the Maker protocol. Users can use this DeFi app to store their assets in vaults and take out overcollateralized loans paid out in Dai, Maker’s in-house stablecoin. Maker previously only allowed users to take out loans by depositing crypto assets, but in April, users were able to mint Dai using real-world assets.

    So far, the Maker community has reacted positively to the proposal, with many DAO members looking forward to a possible collaboration between DeFi and traditional finance. Critics, on the other hand, have pointed out that, while the deal is low risk, it does not provide much reward to the DAO. The bonds’ interest rate is expected to be lower than that of comparable US corporate bonds, which yield 1.93 percent.

    Société Générale has been experimenting with various blockchain applications in finance over the last year. The investment bank previously announced plans to use Tezos to create a central bank digital currency (CBDC). Furthermore, it has aided in the settlement of bonds on Ethereum via the European Investment Bank.

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