A bond market as old as capitalism itself has emerged as the latest proving ground for cryptocurrencies.

A unit of Societe Generale SA sold 100 million euros (US$112 million) of covered bonds—debt backed by mortgages—in the form of digital tokens, with the French bank as the only buyer. The idea of last month's pilot issue conceived by what the bank called an internal startup was to test how the technology behind virtual currencies can be used to cut costs and speed up settlement for the securities.

While traditional finance firms have been reluctant to embrace the futuristic currency, evangelists expect the use of security tokens—virtual representations of assets like real estate and stocks—to boom. They could grow into a $24 trillion asset class in the next decade, according to Finoa, a digital-asset firm in Berlin.

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