EURS — still the №1 stablecoin for institutional companies

Rivals come and go, but we are here to stay

Euro-backed stablecoins still present a very insignficant portion of the cryptocurrency wealth spread across protocols, platforms and crypto wallets. This unfortunate reality present certain roadblocks for EU citizens and everyone who counts their wealth in euro, to enter and navigate the crypto and DeFi seas.

While the first successful initiatives were started half a decade ago, clunky old-fashioned financial giants only now realize the importance and attractiveness of such digital assets. Being the spearheads in crypto realms, we couldn’t miss commenting on the latest attempt in detail, given the tagline and mission that was clearly heavily inspired by the STASIS-issued product.

On a mission not to miss the train

Last week, a French multinational investment bank launched a new euro stablecoin on the Ethereum blockchain through its crypto division, Societe Generale — Forge. The stablecoin is backed by the euro and will be available for use on various decentralized applications (dApps) within the Ethereum ecosystem. The move is aimed at meeting the growing demand for stablecoins and providing a reliable, efficient, and secure means of transferring value in the digital economy.

Over the years, stablecoins have become an integral part of crypto economy, a popular digital asset class amongst investors due to their relative stability and low volatility compared to other cryptocurrencies like Bitcoin or Ethereum.

The bank’s decision to launch a stablecoin is part of its broader strategy to meet institutional investors’ growing demand for digital assets.

However, it’s worth noting that Societe Generale is not the first traditional financial institution to launch a stablecoin. JPMorgan, State Street, and BNY Mellon have all entered the stablecoin market in recent years.

Nevertheless, Societe Generale’s entry into the market is significant given its status as one of Europe’s largest financial services groups.

The launch of SG-EUR is also notable in light of the increasing regulatory scrutiny facing stablecoins. In recent months, regulators worldwide have become increasingly concerned about the potential risks posed by stablecoins, particularly in relation to consumer protection, financial stability, and money laundering.

Centralizing the decentralization?

However, even an overpromoted release didn’t come with a grain of salt from the start. And that particular grain was damn big. Shortly after the announcement the same day, a Twitter researcher checked the code only to amaze themselves and the public with an eye-opening revelation regarding the bank’s institutional stablecoin.

Being an ERC-20 token means the underlying smart contract code was available for inspection. It appears that the ERC-20 token has a number of code issues and the bank has set a dangerous precedent for CBDCs.

One of the main concerns raised in the report was the weakness of the encryption used to secure user data and transactions. The DeFi researchers found that the encryption algorithm used by the stablecoin was outdated and easily crackable, which could allow attackers to intercept and modify transactions.

Developer “0xfoobar” observed that transfers needed additional centralized transactions for approval! “What if we made an ERC20 but instead of settling in seconds, you still have to wait for the back-office fax,” he noted. Moreover, a software engineer “@0xCygaar” found even more insidious clauses buried in the stablecoin code. “The new Euro-pegged stablecoin from SG-Generale has a function that allows them to take all of your money lol,” he said. And that’s not all.

Overall, these findings suggest that Societe Generale’s Euro stablecoin may be vulnerable to cyberattacks and other security threats. The report recommends that the development team conduct further testing and implement additional security measures to address these issues.

Societe Generale has yet to publicly comment on the researcher’s findings, but the company has previously stated that the Euro stablecoin is subject to regular security audits and assessments. However, various researchers suggest that more needs to be done to ensure the security and reliability of the stablecoin’s code.

Really the first?

As more traditional financial institutions enter the digital asset space, we will likely see a further convergence between traditional finance and the world of cryptocurrencies and blockchain technology.

Stablecoins are a multi-billion dollar market which is likely to grow exponentially once institutional cryptocurrency traders and hedge funds enter the field, seeking cryptocurrency assets that mitigate volatility and risk.

The devil is, as always, in details. The general message might be a little deceitful since EURCV is “limited to investors onboarded by Societe Generale group through its existing compliance procedures (KYC/AML-CFT),” it stated.

We’ve seen such attempts in the previous years. Many companies are joining the stablecoin race, trying to take advantage of the elusive opportunity by presenting risky products with misleading claims. The latest product was clearly inspired by STASIS given their promoted mission as the website tagline is pretty much the same.

Long story short, reality check needed here as no single commercial bank-issued stablecoin will ever find a product-market feed since nobody from the external client circle will be comfortably associated with it due to the “single point of failure” problem. The EURB by EuroGermany’s Bankhaus von der Heydt is another excellent reminder of the absurdity of such attempts.

STASIS has been pioneering the institutional-grade stablecoin sector since 2018 with EURS. In fact, any similar digital asset product created by monobanks is doomed to failure because it bears 100% of the risk of the issuing financial institution. On the contrary, the strength of the stablecoin product has always been that it isolates the user from the risk of one particular commercial bank, ideally having a clearing house in the “unsinkable” counterparty — the Central Bank.

Time to climb the learning curve and uplift your knowledge on the topic before engaging in the cryptocurrency market play!