Today, Société Générale-FORGE (SG-FORGE) announced that it has executed a repo transaction using wholesale central bank digital currency (wCBDC) and a public blockchain digital bond that it issued in 2020.
Repurchase transactions (repo) involve selling collateral such as bonds and then subsequently buying them back at a slightly higher price, often overnight. This is a common way banks and institutions borrow and lend cash backed by collateral. Typically, collateral settlement takes time, limiting the duration and speed of repo transactions. Thus, the advantage of blockchain is the potential for instant settlement, which enables intraday repo.
This particular example was not so much about intraday repos as it was about using the Banque de France’s wholesale CBDC or “exploratory treasury tokens” issued on its DL3S platform. The transaction would have been part of trials of settling large DLTs in Eurosystem central bank money that ended in November. When the initial bond was issued in 2020, the settlement also used the Banque de France’s wCBDC as part of an earlier pilot.
DLT and deposit
Other repo transactions in recent ECB trials have used the DL3S for settlement, such as a trial by ABN AMRO. That of SG-FORGE stood out in two ways: the other party to the transaction was the central bank itself and the collateral was a digital bond issued on the public Ethereum blockchain.
Repo is a use case that is already gaining momentum thanks to DLT, with Broadridge’s DLR processing $1 trillion in transactions per month.
In the meantime, this is a new first for Société Générale and SG-FORGE. It was the first to issue a bond on Ethereum in 2019. It was the first to facilitate a digital bond issuance by the European Investment Bank (EIB) also on Ethereum. SG-FORGE (which is not itself a bank) was the first European institution to issue a stablecoin, EURCV. It also borrowed money from the MakerDAO DeFi protocol by pledging a digital bond as collateral.
