Introduction
Société Générale is the first big bank to debut its own stablecoin, EUR CoinVertible, on a prominent crypto exchange, Bitstamp. The significant distinction with this stablecoin is that it will be available for widespread trading, unprecedented for other banks. As a result, Société Générale will have a very diverse range of investors which creates many questions; Are other institutions going to follow? Will stablecoins tied to euros present a threat to the leading ones tied to the dollar?
Société Générale: History
Société Générale is a multinational commercial bank, based in France that specializes on financial services. It was founded in 1864 and after being nationalized and several acquisitions later, it is currently France’s third largest bank with respect to total assets as well as the sixth in Europe. In April 2023, Société Générale initially launched CoinVertible, deployed in euro domination on the Ethereum public blockchain. Therefore, institutional clients were offered the chance to gain profit by taking advantage of this innovative cash management solution. The bank advocates that the stablecoin was designed to fill in the gap between traditional capital markets, as itself it is a traditional big firm, and digital assets.
The stablecoin was deployed on Ethereum blockchain and is now listed in Bitstamp which is “an important step for broad adoption of our stablecoin,” according to Jean-Marc Stenger, the CEO of Société Générale Forge. Bitstamp is the world’s longest running cryptocurrency exchange, founded in 2011 and allows exchanges between a wide range of currencies. Ethereum, however, is quite different as it provides a peer-to-peer network that securely executes application code, it can be used as a digital currency and also kept as an investment.
Stablecoin?
A stablecoin is a cryptocurrency whose value is tied to another currency, commodity or asset and attempts to offer price stability (low volatility). For example, Bitcoin, the most well-known cryptocurrency, has had tremendous fluctuations in price over the years. Looking back to the beginning of this week, Bitcoin accomplished a 150% rise solely this year on Monday. However, it must not be omitted that the cryptocurrency lost almost 60% of its value in 2022. Any currency resembling the volatility of Bitcoin should not even be considered for everyday use and an alternative should be preferred that maintains its purchasing power/ value and stablecoins are deemed that solution. What makes them desirable and sought after is that they offer speed and privacy like other cryptocurrencies but also the stability in value of government issued fiat currencies which is a unique combination.
Is It All Good?
It is never “all good”. Like every other currency they have a plethora of limitations to consider. First and foremost, stablecoins face liquidity risks especially during market stress and periods of high demand for borrowing/ redemptions. Insufficient liquidity could impact the desired stability of the stablecoin. Additionally, they may face regulatory challenges as every single change in regulatory environments can impact the stability and legality of stablecoins. Last but not least, the success of a stablecoin often lies in widespread adoption. If one lacks adoption or enters a very competitive market with other, more accepted stablecoins it will struggle to offer stability and attract consumers because of the former.
Leading Stablecoins
The most well-known and largest in terms of market capitalization is Tether USDt (USDT), one of the oldest stablecoins. Tether is pegged to the US dollar (1:1 ratio) and backed by gold reserves. Another very successful stablecoin is the USD Coin (USDC) which was launched in 2018 and it was designed to maintain a stable value by pegging it to a fiat currency, in this case, the United States Dollar (USD). Finally, Binance USD (BUSD) is a noteworthy stablecoin as it launched in 2017, reached a market capitalization of over 100 billion dollars in 2021 and provides several services.
It can be observed that all of these are tied to the US dollar and in the image below (Figure 1), the magnitude of the dominance of the dollar is portrayed. It can be easily implied that even on a public exchange, the EUR CoinVertible will face problems with customers as stablecoins backed by the dollar are usually more preferred to those tied to the euro, as discussed above. Along the months and years, the result will be recorded but EUR CoinVertible could always be the exception as it is being fueled by a huge, reputable organization and in the future, it could even grow that much to present a valid threat for the current stablecoin leaders. For Socie te Ge ne rale, the stablecoin seeks to serve as a settlement as well as a reserve asset for blockchain transactions for treasury management.
It should also be acknowledged that the US almost defaulted on their debts which could have very interesting results not only on the economy but also especially on the stablecoin tied to the US dollar as they would lose their stability.
Conclusion
A traditional financial giant, Société Générale, has entered stablecoins. This pioneering event signals a revolutionary era where many await whether other banks are going to follow, or they simply consider it too risky and unprofitable. The move to list the stablecoin on Bitstamp is viewed as a pivotal step toward achieving broad adoption. However, challenges may arise as CoinVertible enters a market where stablecoins tied to the U.S. dollar currently dominate. Nonetheless, Société Générale’s reputable standing could potentially position CoinVertible as a contender in the stablecoin arena, challenging existing leaders.
References
Armandet, Pauline. “La Société Genéralé, premiere banque europeenne à lister son stablecoin euro sur une bourse crypto.” BFMTV, 6 December 2023,
Asgari, Nikou. “Societe Generale to become first big bank to list a stablecoin.” Financial Times, 6 December 2023,
“Bitcoin's bounceback dejà vu - Cryptocurrencies.” Financial Times, 5 December 2023, https://www.ft.com/content/1222843b-ff71-4517-9e15-d643f8919cf0
“Bitstamp Review 2023 – Forbes Advisor.” Forbes, 17 November 2022,
Clarine, Skylar. “Stablecoins: Definition, How They Work, and Types.” Investopedia, 2023, https://www.investopedia.com/terms/s/stablecoin.asp
Glover, Ellen, and Brennan Whitfield. “14 Top Stablecoins to Know.” Built In, 2023, https://builtin.com/blockchain/stablecoin . Accessed 7 December 2023.
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