How SGSS embraces Digital Assets and DLT in Europe’s evolving financial ecosystem

This article is part of a three-part series:

• This first article delves into how the Societe Generale group and in particular SGSS have organised themselves to face these transformations, highlighting the actions taken and the most significant achievements.

• The second publication focuses on operational workflows and infrastructures, essential elements for the creation of a common framework.

• The third article examines the state of the art of the main regulatory requirement and market trends shaping the near future.

What are digital assets and Distributed Ledger Technologies (DLT)?

Digital assets and distributed ledger technologies (DLT) have become a strategic must for professionals in post-trade and securities services. The financial sector’s digital transformation is no longer a future vision, it’s a present reality demanding proactive engagement, backed by growing regulation and an industry ready to move beyond proof of concept.

Digital assets refer to assets that exist in a digital format and are stored on a blockchain or other distributed ledger technologies. These can include:

• Cryptocurrencies.

• Security tokens.

• Stablecoins.

• Utility tokens.

Distributed Ledger Technology (DLT) is a decentralized database managed by multiple participants, where transactions are recorded securely and transparently. Blockchain is the most well-known type of DLT.

These technologies are reshaping the financial industry by enabling faster, more secure, and more transparent operations, especially in post-trade and securities services.

In recent years, important steps have been taken by European and national regulators and supervisors to enable market participants to concretely explore Distributed Ledger Technologies and crypto assets within a new digital financial ecosystem. Markets in Crypto-Assets Regulation (MiCAR), Pilot Regime, sandboxes and local regulations such as the Italian FINTECH decree, the Luxembourg BLOCKCHAIN I – IV package of laws, the French PACT LOI and the German Gesetz über elektronische Wertpapiere – eWpG, to name a few.

Putting expertise into action

Within the Societe Generale group, business and technology professionals have consolidated their expertise through the analysis of existing use cases, pilot projects with clients, and active participation in institutional working groups, industry labs, and sandboxes. The key to success has been, and will continue to be, the ability of individuals to combine traditional know-how with technological innovation, a fundamental element for the successful and swift implementation of any initiative. Human resources are flanked by organisational and infrastructural resources, as demonstrated by the creation of Societe Generale-Forge (SG-Forge), a fully integrated subsidiary of Societe Generale group. Its mission is to create a bridge between capital markets and digital assets.

This strategic vision, combined with an analytical and pragmatic approach, enabled:

• The first issuances of bonds¹ and structured securities² on Ethereum and Tezos.

• The execution of subscriptions and redemptions of fund units on the blockchain platform (2018)³.

• And other initiatives, including the most recent and operationally comprehensive of these took place within the framework of the European Central Bank (ECB)’s trials for wholesale digital euro. In this context, SGSS, SG-Forge and some clients were able to execute transactions of securities and funds units with the digital euro settlement counterpart.

Within SGSS Italy, the commitment to these issues has taken the shape of an agile and cross-functions work hub dedicated to Innovation, where a range of competences, technological, operational, business, compliance, legal, tax and human resources, meet periodically to discuss, share ideas and promote initiatives and content both internally and externally on the occasion of Italian and/or foreign institutional working groups, thus concretely supporting to design the "playing field" of tomorrow.

What are the scenarios on the horizon?

Sharing among players will be a central element and the ability to connect and integrate different skills will be key to determine the success of the initiatives. This requires an increasingly close dialogue between the traditional world of securities services and the new Fintech environment, where winning collaborations see experts from the traditional meet technological innovators and build effective communication together.

That is the experience of SGSS alongside clients and an Italian fintech, Blockinvest, concretely exploring an institutional operative framework for tokenisation. We have observed, more generally, that the industry is progressively considering a new operating model, more effective, faster and safer, in which traditional roles are integrated by enhancing the skills of the different players in the chain (e.g. issuers, asset management companies, distributors, custodian bank, transfer agent). In this context, investment funds and unlisted debt securities seem to us to be instruments that, due to operational and market characteristics, will be the first to favor the establishment of the foundations of the new digital ecosystem.

The digital currency will be the driving force necessary to enhance the benefits deriving from technology in a complete and profitable way. The choice of digital currency type will depend on the specific use case and its correct combination of technology, regulation and value for the client.

Within this ecosystem, SGSS supports its clients with the flexibility, responsibility and courage to innovate that have always been part of Societe Generale's DNA.

Oscar Maffioletti, Deputy General Manager Staff, Societe Generale Securities Services

Sources:

1. LUXSE ADMITS SECURITY TOKENS ISSUED BY SOCIETE GENERALE (01/2022) SOCIETE GENERALE ISSUES A FIRST DIGITAL GREEN BOND ON A PUBLIC BLOCKCHAIN (12/2023)
2. SOCIÉTÉ GÉNÉRALE ÉMET LE PREMIER PRODUIT STRUCTURÉ AU FORMAT « SECURITY TOKEN » SUR UNE BLOCKCHAIN PUBLIQUE (04/2021)
3. Société Générale Securities Services et OFI Asset Management exécutent les premières transactions via blockchain sur le marché parisien