Why French Lender SocGen Issued a $110 Million Ethereum Bond to Itself

Six months after Societe Generale issued its first bond on a public blockchain, it has yet to offer the instrument to clients or to make use of the full capabilities of the smart contract mediating the sale.

Both sides of a $20 million bond transaction on ethereum, meaning it not only issued a token to represent debt but also settled the amount using other tokens representing cash.

While SocGen still owns the bond that it created, the lender will monitor whether ethereum's smart contract can automate the typical functions of debt issuance.

"We are demonstrating that all the events of the bond are written in the smart contract and that all the events are managed by it," Stenger said.

Next on Stenger's list of experiments is to offer a blockchain-based bond to external investors and to tokenize other financial instruments, including different types of bonds.

According to EtherScan, a blockchain explorer site, around the time that SocGen announced the bond's issuance there was a transfer from one address to a registered investor address held by the lender.

Registered investors wanting to buy a bond token must hold a wallet that is whitelisted, or previously vetted by the issuer to comply with regulations.

The 1,000 SocGen tokens sitting in the address, which are supposed to represent €100 million of bonds, can't be subdivided or moved unless the bank adds more ether to the smart contract address, noted Stefan Loesch, partner at Lexbyte, a tokenization advisory firm.

Stenger said that the bank doesn't need gas to redeem the bond.

"The intention is to leverage this technology to have a more efficient way of issuing and processing bonds going forward," he said.