SocGen lists its own stablecoin
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Illustration: Shoshana Gordon/Axios
Enterprise blockchain projects from the world of traditional finance usually go nowhere, but one European bank's stablecoin could flourish outside the confines of its walled garden.
Why it matters: Bank-issued stables are a big no-go in the U.S. and how to regulate it remains a point of contention for the industry and policymakers.
- But with Europe's MiCA set to go into effect next year — its comprehensive regulatory framework for digital assets — big businesses there can push ahead.
Driving the news: Société Générale's digital-asset arm turned heads yesterday when it listed its own euro-backed stablecoin called EUR CoinVertible (EUR-C) on Luxembourg-based crypto exchange Bitstamp, opening the stablecoin to anyone.
- SocGen's SG Forge first unveiled the stablecoin on Ethereum in April as an on-ramp for private clients of France's third-largest bank by assets to settle tokenized green bonds, opening a cashless avenue to complete a securities transaction.
How it works: The structure of EUR CoinVertible, in compliance with regulations, means the collateral backing the stablecoins — cash or equivalents — is legally separated and dedicated as collateral.
- If something goes bump in the night, holders would have recourse on the collateral backing the stablecoin to protect them, according to the project's whitepaper.
- Yes, but: While SocGen's stablecoin being listed on a crypto exchange opens it to more people, those who buy it on third-party platforms will bear additional counter-party risk, the whitepaper notes, though this limitation is not particularly different from how the leading cryptocurrencies work.
State of play: Euro-denominated stablecoins make up a teensy sliver of cumulative trading on exchanges, according to Kaiko Research (see below), but that could change with the entrance of a big bank-issuer.
What they're saying: "SocGen is really pushing the envelope and experimenting, and that's good because stuff like that has to happen for this industry to move forward," Lucas Vogelsang, cofounder of Centrifuge, tells Axios in an interview.
The U.S. picture: Caitlin Long, CEO of Custodia Bank, said the SocGen event was "extremely meaningful," confirming her worst fears that the U.S. would fall behind in the stablecoin race.
- "This is what U.S. policy has thrown shade on," Long tells Axios. "We've lost at least a year in a market that moves at lightning speed — while Europe and the Middle East try to grab the regional power centers in technology, the U.S. is ceding it to rest of the world."
- Custodia Bank had plans to issue a stablecoin but has been drawn into a legal battle with the Federal Reserve Bank in Kansas City over its denial of a master account.
Context: Among the Kansas City Fed's concerns: how dangerous the bank's stablecoin could be if Custodia were allowed into the Fed's banking system.
Separately, recall that Facebook unceremoniously shuttered its Diem project, saying U.S. regulators had made it clear it wouldn't fly. Silvergate Bank, which later bought it, never moved beyond plans to launch and the bank was closed after the FTX crash.
What we're watching: Perhaps Europe's lead will move the U.S. to pass stablecoin legislation.
