Stablecoins : le grand bouleversement de votre portefeuille - Jean-Marc Stenger

This discussion explores the evolving landscape of finance, particularly the convergence of traditional finance with digital assets and blockchain technology. Jean-Marc Senger, CEO of Société Générale Forge, an entity dedicated to digital assets, outlines his company's mission to bridge these two worlds. Société Générale Forge, a pioneer in the crypto industry among traditional banks, began exploring blockchain technology and crypto assets as early as 2018. The formal subsidiary was created in 2020 to operate within a regulated framework, obtain necessary licenses for client services, and consolidate expertise in this emerging field. The discussion highlights that crypto assets are no longer a niche topic, with approximately 14% of French people holding them, according to a recent study. For Société Générale Forge, the primary interest in crypto lies in blockchain technology's potential for profound transformation of the financial ecosystem and markets, rather than just the crypto assets themselves. Initial developments at Société Générale Forge focused on the tokenization of financial assets. This approach involved creating financial assets like bonds or shares as digital tokens on a blockchain. This was deemed more appropriate than directly engaging with cryptocurrencies at a time when regulatory and legal frameworks were unclear, and the risks associated with such assets were poorly defined. Tokenization, in this context, does not alter the fundamental nature of the financial instrument. An action remains an action, and a bond remains a bond, regardless of whether it's issued traditionally or as a token on a blockchain. The key difference lies in the method of issuance and exchange. The advantages of tokenizing financial assets are numerous. Firstly, it allows for much more fluid and less expensive exchanges, significantly reducing operational costs of financial transactions. Secondly, it enhances the "distributability" or accessibility of financial instruments. Traditional market infrastructures are often regionalized, limiting access to certain types of assets based on geographical location. Issuing financial instruments on a decentralized, global blockchain network, akin to the internet for value, vastly expands access for investors worldwide and allows companies to raise funding more broadly and efficiently. This democratization of access can enable smaller businesses, previously hindered by high entry barriers and operational costs, to secure financing. Moreover, tokenized assets can operate 24/7, unlike traditional markets with defined opening hours. This continuous operation is supported by blockchain networks that run non-stop. Tokens can also be "enriched" with dynamic, self-executing computer code. For instance, a token representing a bond could automatically calculate and execute coupon payments, making the financial instrument self-contained and dynamic, benefiting both issuers and investors. The conversation then shifts to stablecoins, which are considered fundamental for the evolution of finance and indispensable for the tokenization of financial assets. Despite their importance, only 16% of French people understand what a stablecoin is. Stablecoins are essentially digital cash. Just as traditional financial transactions require cash, digital asset transactions need digital cash. A stablecoin is a digital token on a blockchain that maintains a stable value, typically pegged 1:1 to a fiat currency like the euro or dollar. Société Générale Forge has issued two such stablecoins: a euro-convertible stablecoin and a dollar-convertible stablecoin. The mechanism is simple: clients deposit real euros or dollars into a bank account, and an equivalent amount of digital euros or dollars (stablecoins) is issued. The deposited fiat currency is held in reserve, ensuring that the stablecoin can be converted back to traditional currency at any time. The primary use cases for stablecoins include: 1. **Crypto Ecosystem Transactions:** Stablecoins are widely used within cryptocurrency markets for transactions between cryptocurrencies or as a safe haven during periods of high volatility. Investors can convert their volatile crypto assets into stablecoins to secure their value, remaining within the crypto environment but reducing risk exposure. 2. **International Value Transfers:** Stablecoins offer a more efficient alternative to traditional international bank transfers, which are often slow, expensive, and involve multiple intermediaries. Transfers via stablecoins between digital wallets are instantaneous, nearly cost-free, and potentially more secure, leading to the development of "payment corridors" for international transactions. 3. **Inter-institutional Financial Exchanges:** Although still nascent, a significant potential use case is in value exchanges between financial institutions, particularly for managing collateral and margin calls. Given the colossal amounts involved in these transactions, using stablecoins could offer substantial efficiencies. Currently, the most prevalent use of stablecoins is for entering and exiting crypto markets ("on-ramping" and "off-ramping") and for facilitating trades within these markets. This explains why stablecoins have a rapidly growing market capitalization, currently around $360 billion, with 68% of users citing investment as their primary reason for use. A distinction is drawn between stablecoins issued by commercial entities like Société Générale Forge and a potential digital euro issued by the European Central Bank (ECB). The key difference lies in the issuer: commercial banks issue commercial money (stablecoins), while central banks issue central bank money (like the proposed digital euro). The banking sector's initial skepticism towards crypto has given way to rapid acceleration in adoption. This shift is attributed to several factors: increased technological maturity, successful experimentation by banks, and the emergence of clear regulatory frameworks. The EU's MiCA (Markets in Crypto Assets) regulation, enacted over a year ago, provided a much-needed legal framework, defining crypto assets and stablecoins, and enabling regulated development. Similar regulations are emerging in other jurisdictions, including the US. Another significant driver is the increasing competition from "crypto-native" actors – exchanges, brokers, and crypto banks – who have developed highly efficient services based on blockchain technology. These entities are increasingly offering financial services that challenge traditional banks, compelling established institutions to adapt and integrate these technologies to remain competitive. While traditional banks bring security, trust, and established client bases, crypto-native players bring technological efficiency. Both sides are converging, striving to offer the best services to clients. Regarding the dominance of dollar-denominated stablecoins (98% of the market), this is largely due to the historical dollar denomination of crypto markets. However, there is a growing recognition of the need for euro-denominated stablecoins to address monetary sovereignty concerns, particularly in Europe. The MiCA regulation has significantly boosted the demand for euro stablecoins, as European clients naturally prefer to transact in their native currency. Société Générale Forge has observed stronger growth in its euro-convertible stablecoin compared to its dollar-convertible one, indicating a clear market demand from European crypto platforms and users. While there's a risk of "dollarization" due to the liquidity and size of dollar stablecoins, the demand for euro stablecoins is expected to grow exponentially as money digitizes and payment flows shift from traditional to digital formats. Looking ahead, a significant portion of financial assets and flows are expected to be tokenized, though perhaps not 100%. This transformation is seen as irreversible due to the "unbeatable" intrinsic value proposition of tokenization, which offers significant improvements across various financial parameters. While early internal projections for this shift were 15-25 years, the actual pace has been much faster, with commercial developments occurring within 5 years. Société Générale Forge's ambition is to be a leading European issuer of stablecoins, meeting the growing needs of institutional clients and large or small businesses for improved payment flows. This is a fast-paced "race" in a young market with immense potential. For individual clients, Société Générale Forge's euro-convertible and dollar-convertible stablecoins are available on various crypto exchanges, brokers, and payment service providers. Institutional clients and businesses can directly engage with Société Générale Forge through their usual points of contact within the Société Générale group.