Societe Generale, the largest bank in France, issues a stablecoin | Hacker News Reader

Societe Generale, the largest bank in France, issues a stablecoin

sgforge.com

36 pointsmiohtama20 comments

Remember how in the 19th each bank to issued their own currencies? I wonder why that got banned...

Were they also running the currencies on a publicly viewable, worldwide distributed ledger? Could you see exactly where it went and where it came from?

Something is telling me this is a bit different, compared to 19th century banks

Except the assets that maintain the stability of their stablecoin are stored off-chain and we will have to trust someone’s word that they exist in sufficient quantities.

Trust in a bank's stablecoin obviously tied to trust in that bank's stability in general. So this particular problem is reduceable to the one we've been having all the time banks exist.

I have a feeling checking that a bank indeed stores the amount or X coins that they’ve minted on the network should be an easy audit. Although non-crypto digital money nowadays is a mess so I’m not even sure if that’s possible.

There is no need to audit the liabilities (i.e. the stablecoin issued), what matters are the assets/reserves.

And since these by nature are not on-chain for a fiat currency backed stablecoin, this is not trivial at all: Not only do you need to plausibly demonstrate the existence of assets, but also that they are not otherwise encumbered.

That’s what I meant, how do audit reserves when it’s most likely a digit in the bank account database? You’d have to audit their accounts at all banks including central banks. If only banks used crypto :))

In this case, you have trust one of the largest bank of France and the French authority auditing it (these are regulated assets when it comes to backing). That feels to me a bit safer than some random company in a tax-haven.

It comes a bit late sadly.

Don't worry about them.

They were involved in the Libor things

They were involved in lybian government funds scandals

They had 2.6B of settlement in the USA for these cases.

They were involved in Panama papers

They once lost pocket money in risky investments (4.82 billion EUR) before the subprimes hit them (2.1B) (see the Kerviel case)

So I wouldn't trust them if they said they were the most socially responsible company out there.

But I trust them more than meme makers at FTX to back a stablecoin.

Thats not relevant. You are seeing only the stablecoin side of the ledger but not the euro side. It could be that they issued far more stable coins than euros in their reserve.

An analogy would be the 19th century bank publishing the list of people holding its money. Not terribly useful

Banknotes in Scotland are still issued by retail banks. https://en.wikipedia.org/wiki/Banknotes_of_Scotland

But

> the law requires that the issuing banks hold a sum of Bank of England banknotes or gold equivalent to the total value of notes issued

Don't be fooled by the name. It is not a currency. It's a "digital asset" which is something which is both well defined in French law and has to follow strict regulation regarding its backing. At the end of the day, it's euro-denominated and euro-backed.

It's actually interesting when it comes to smart contract. As far as I know, this is probably the safest collateral existing nowadays.

Mostly because of economic theories that turned out to be empirically wrong during the 20th.

Most countries where free banking was the norm had very stable financial systems. https://en.wikipedia.org/wiki/Free_banking

Note that the United States never had free banking.

A "stablecoin", as far as I can tell, is just a cryptocurrency backed by an unenforceable promise by some entity that they will always buy the currency at a fixed price. If SG says "April Fool's!" in two weeks and declines to actually buy back the coin anymore, what would be the cost to them? I doubt anyone would withdraw their real funds just because the bank abandoned its crypto experiment. The article talks about a "secure legal structure", but at the end of the day, can any holder of the coin sue SG for its promised value? Without that, "secure" is meaningless.

What could go wrong?

On a more serious note, their CAST framework [0] looks like it is trying to solve real problems faced by existing cryptocurrencies. Still quite a lot of hand waving, but I wouldn't be surprised if it creates legal precedent for digital securities and makes it easier to regulate / fit the regulation.

[0]: https://www.cast-framework.com/

Digital coins and banks don't mix well, as the recent bank runs have shown.

The entire premise of banks is that they know their customers withdrawal and deposit patterns, which are usually independent and not very correlated, and they can invest the money in the mean time.

But stablecoins are extremely unstable from a bank point of view. They can get withdrawal spikes, which result in bank runs. There's no way around that.

> The entire premise of banks is that they know their customers withdrawal and deposit patterns, which are usually independent and not very correlated, and they can invest the money in the mean time.

Usually, but not nearly always – see SVB.

But then again, there is nothing that says a stablecoin issuer (or bank for that matter) absolutely needs to lend long and borrow short: They can just as well park their entire deposits at the central bank.

They say the contract source will be open source, ok, but what chain does this run on?

If you read the article it's right here:

https://etherscan.io/address/0xf7790914Dc335B20Aa19D7c9C9171...

Looks like they have minted 10M tokens. No transfers have occurred yet.

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