One of France'southward leading banks has turned to decentralized finance pioneer MakerDAO to propose the submission of bond tokens as collateral for a loan of the DAI stablecoin.

The historic proposal, called "Security Tokens Refinancing," was submitted to Maker'south governance forums by the international bank on Fri. It would be the offset major collaboration betwixt a traditional depository financial institution and a DeFi protocol, and could open the door for closer integration betwixt the two sectors.

Societe Generale (SG) labeled it as the "first experiment at the crossroads between regulated and open source initiatives."

The banking company has proposed that it provide "OFH" security tokens (obligations de financement de l'habitat), which are characterized as covered bonds under French police and backed past home loans.

These would exist used to collateralize a $20 million loan in Maker'due south DAI stablecoin that would exist mediated by a number of legal entities and mature in six to nine months.

The Ethereum-based security tokens were issued in May 2022 with a nominal amount of forty million euros ($46.3M) and a fixed rate of 0%. They mature in May 2025 and take the top credit rating of AAA past rating agencies Moody'southward and Fitch.

MakerDAO founder Rune Christensen said he had "no inkling" about this proposal, adding that "this is one of multiple recent examples in Maker Governance of how the post-foundation model of system is proving to be more than scalable."

Manufacture observer "DCInvestor" commented on the potential impact of deals such as this on Ethereum and its position equally a global settlement layer:

"Societe Generale with their endeavour to go their on-chain assets usable in Maker and you're wondering if Ethereum will become a global settlement layer it's happening, at present."

SG stated that the loan would be a "pilot use case," with the goal of helping to "shape and promote an experiment under the French legal framework," and "enhance a assisting service and foster liquidity for digital bonds."

SG Forge, a regulated subsidiary of the bank that deals with crypto assets, is managing the proposal, which is based on the open-source framework CAST (Compliant Architecture for Security Tokens).

The legal framework for the deal is circuitous as it needs to integrate an institutional financial system with a decentralized governance-based network. A flowchart provided by the banking company details half-dozen split up entities involved in the procedure. These include the registrar Societe Generale Forge; the bank, itself; SG; MakerDAO; a legal representative for the DeFi protocol; the security agent DIIS Group and a tertiary-party exchange amanuensis.

Source: forum.makerdao.com

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Pseudonymous MakerDAO community member 'PaperImperium' commented on the proposal in the forum:

"Maker and SocGen-Forge are standing at the precipice of financial history. What a time to be alive."

The proposal is currently being discussed and will move to a formal governance vote in the weeks to come.

It is not the first time Societe Generale has dabbled with Ethereum-based security tokens. In April 2022, the depository financial institution's SG Forge unit of measurement issued a 100 million Euro bail every bit an OFH security token on Ethereum.