The Future of France 🇫🇷 It’s a tongue-in-cheek saying about outsized French influence in DeFi since at least ETH Paris. But France has long been at the forefront of experiments in financial markets and instruments, including using real estate as collateral for a paper, yield-bearing stablecoin called the Assignat. The Assignat had a face value, with interest coupons attached. It began trading as currency fairly quickly as coins became scarce due to hoarding. That’s interesting, but not what makes the Assignat unique. The collateral backing these notes was land seized from the Crown and the church. Perhaps there was a memory of the discounted prices Henry VIII got when mass dumping church lands. Or perhaps the revolutionary French were just more thoughtful than Tudor monarchs. The new government wanted to realize fair value of the lands by selling them off in an orderly manner. But it also needed money today. The solution was the Assignat. Issue the notes backed by huge swaths of land, attach a small yield (3% in examples I found), and pay it off with the land sales + rents in the meantime. It’s a pretty elegant solution - a lot like asset backed securities today. Of course, there’s never been a government that felt it had enough money, so they just kept issuing Assignat notes above the collateral value. Surprisingly, markets seemed to have anticipated this, with significant fees charged by money changers to convert large denomination Assignats to petty notes within a few months. Either they didn’t believe the collateral was good or foresaw the temptation to debase the notes just as they would metallic coins. While the Terror under Robespierre managed to force acceptance of the notes in the neighborhood of face value, his fall let the true value show up in markets immediately. In the end, the Assignat should look familiar to anyone dabbling in stablecoins backed by illiquid real estate. Its failure modes map pretty closely to those seen in DeFi.