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The Banking Future and how blockchain has a part to play in it.

The investment bank Societe Generale took a decision to issue a security token like bond in which it was both the issuer and the sole investor. The decision seems kind of unnecessary but the real deal behind it makes it an important step when seen in regard to the financial institutions. The decision includes issue of $112 million worth bond that will be available on the public and not on any private basis but certainly through a permission blockchain but that also without Ethereum (ETH) Blockchain permission.

Banks mostly use the blockchain that is private and without permission and they feel compelled to use private and without permission blockchain. The Banks are used to maintain privacy and for that private and permissionless blockchain are necessary and the public blockchain with permission required do not suit their requirements. The decision is an important step as it ensures that other Banks do not turn their bank on the threats caused by the permissionless blocks such as Bitcoin (BTC), Ethereum (ETH) and others.

The decision of the Bank is based on the assumption that “History might not repeat itself.” The Banks feel that the digital currency may not become the future of finance sectors. The digital currency might or might not rule the finance sector as the internet did when it was introduced in the nineties and ruled the world. Internet became the new definition of information sharing and this might not just happen with digital currencies.

However, the Bank did not make the bond’s terms in parity with other covered bonds suggesting that the future owners would have equal ranking and risk exposure as any investors in Societe Generale more conservational bond issues. Moreover, a five-year maturity, there is ample time for the Bank can also seek outside buyers once it has support for regulators. The rating agency Moody has given a positive signal to the blockchain technology in this case because of the increased transparency and reduced errors along with the reduction in the number of intermediaries involved.

The Societe Generale has taken some risk in initiating this step because the step can put at risk some of its business. The French Bank hopes that the other banks will also understand its stance and also adjust themselves accordingly to provide a more transparent blockchain technology.

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About Ritika Sharma

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Ritika Kumari Sharma is an Economics Honors graduate from the University of Calcutta. She is completely into finance and believes that cryptocurrencies are the future. She is an enthusiast learner about the cryptocurrency and blockchain technology.

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