This Friday, Societe Generale-Forge (SG-Forge), a subsidiary of Societe Generale (SG), submitted a proposal to the DeFi protocol MakerDAO, which plans to use the latter to refinance the security token OFH. DAI with a target amount of US$20 million .
Considering that SG is one of the three giants in the French banking industry and one of the largest investment banks in Europe, the Maker community has responded positively to this proposal. Many DAO members feel about the potential partnership between DeFi and traditional finance. excited.
“It turns out that this is the future of France! This cooperation is one of Maker Governance’s many cases. It proves that the post-foundation’s organizational model is more scalable.” MakerDAO founder Rune Christensen said.
“Maker and SocGen-Forge are standing on the edge of financial history. What kind of era is this.” DAO community representative PaperImperium said.
Of course, some community representatives believe that although the risk of this transaction is very low, it does not bring much return to MakerDAO. The interest rate of securities tokens (fixed interest rate 0%) is lower than similar US corporate bonds, the latter’s yield rate It is 1.93%.
Like all previous Maker Improvement Proposals (MIPs), MakerDAO token holders will finally vote to decide whether they will implement the SG-Forge plan, and there is no official vote yet. If the proposal is accepted, this transaction will also become the maximum amount of interaction between the DeFi agreement and the traditional investment company, and it will also provide an example for the subsequent out of the circle of other DeFi agreements.
Odaily Planet Daily also sorted out some details of the proposal for readers’ reference.
1. OFH token remortgage, complicated process
SG-Forge proposal mentioned “OFH tokens”, based on the credit institutions SG SFH Ethernet Square release, release date is May 2020, the due date is May 2025; nominal amount of 40 million euros (46.3 million U.S. dollars), with a fixed interest rate of 0%; the security tokens comply with French law and are supported by housing loans, and are also rated AAA (highest credit rating) by rating agencies Moody’s and Fitch, which means they have high Creditworthiness and strong ability to repay investors.
In the proposal, SG Forge stated that the use of securities tokens as collateral to remortgage financing is based on the open source framework CAST (Securities Token Compliance Framework); DAI as a loan is also recognized by French law.
Briefly introduce the mortgage process: parent company SG transfers the ownership of OFH tokens to SG Forge, SG Forge will provide USD loans (“USD loans”) to SG; SG-Forge pledges OFH tokens in the Maker vault to obtain DAI Loan; SG-Forge cooperates with a third-party company to exchange DAI into U.S. dollars.
The mortgage loan cycle is 6-9 months, and it plans to raise 20 million DAI. After the expiration, the redemption process is as follows:
- SG will redeem the USD loan from SG-Forge;
- SG-Forge cooperates with a third-party company to convert USD received from SG into DAI;
- SG Forge will return DAI to Maker and redeem OFH tokens;
- OFH tokens will be transferred back to SG from SG-Forge.
The above transaction process is just a brief description, the specific transaction process is actually more complicated, because it also needs to comply with legal regulations. The proposal details the six independent entities participating in the process, including: registrar SG Forge; parent company SG; MakerDAO agreement; MakerDAO’s legal representative; security agent (currently DIIS Group) and third-party transaction agent (will DAI is exchanged for U.S. dollars).
(Transaction flow chart)
“Maker’s legal representative may be one of the legal entities we’ve been experimenting with. I’m not sure whether we’ve identified which one, but we have several structures and jurisdictions to choose from.” MakerDAO community representative PaperImperium said in an interview , No specific legal person has been appointed at present.
Considering that MakerDAO currently does not have an entity or legal person, the proposal suggests that DIIS Group concurrently serve as the legal representative of MakerDAO, but it still needs to be approved by the community.
2. How to liquidate?
Earlier we introduced the conventional mortgage/redemption process of OFH tokens, but since it is used as collateral, there is a risk of liquidation.
Generally speaking, the collateral on the chain can be liquidated in real time with the help of the oracle quotation, and the extreme market will be liquidated directly. This time the mortgage liquidation is more “human”.
The proposal shows that the collateral agent will perform a collateral test every working day to verify whether the market value of OFH tokens is at least equal to the determined collateral percentage. If the conditions are not met, the collateral agent will notify the SG and the securities agent to cover the position: increase the value of the collateral, or send a certain amount of dollars to reduce the loan.
From the date of receipt of the notification, Societe Generale must complete the replenishment of the position within five working days, otherwise it will trigger the collateral liquidation.
After receiving the notification of the liquidation event, the security agent DIIS Group will perform the liquidation and can sell OFH tokens or hold OFH tokens for community accounts until the expiry date and final redemption, provided that there is sufficient liquidity.
If the redemption amount paid by SG SFH to the securities agent exceeds the amount payable under the DAI loan plus the closing fee, the securities agent will transfer the excess amount to SG; if the redemption amount paid by SG SFH to the securities agent is less than DAI The maturity amount under the loan plus the liquidation cost, the difference will be considered zero.
3. DeFi+TriFi, join forces
In fact, the cooperation between Societe Generale and MakerDAO is not surprising. Both have tried DeFi+TriFi respectively before.
As early as April of this year, Maker made the industry headlines by issuing a loan of US$38,000 to finance real-world pledged loans; in addition, since last year, MakerDAO has been cooperating with Tinlake and Centrifuge to transfer music rights, accounts receivable, etc. Real assets are introduced into the crypto market.
In the past year, Societe Generale has tried various applications of blockchain technology in the financial field. The investment bank previously announced plans to use Tezos to create a central bank digital currency (CBDC). In addition, it also helps the European Investment Bank to help settle bonds through Ethereum.
Regarding this cooperation, Societe Generale (SG) characterized it as “the first experiment at the crossroads between regulated and open source projects.” SG Forge said: “This will be a “pilot use case”, the goal of which is to help establish a legal structure for refinancing and apply appropriate accounting and operating principles, help shape and promote experiments under the French legal framework, and promote the flow of digital bonds. sex. “
Sébastien Derivaux, head of MakerDAO’s Real World Finance department, said that the side benefit of this cooperation is that it proves that the path of introducing traditional securities into the crypto world is promising.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/a-subsidiary-of-societe-generale-plans-to-raise-20-million-yuan-through-makerdao-these-details-will-determine-success-or-failure/
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