Last updated on November 17th, 2022 at 12:42 pm
Yuga Coin, a stablecoin designed to be backed by government debt, has been awarded a U.S. patent, the two co-founders of the Puerto Rico-based digital FV Bank have said, noting their place as first in history.
According to a patent application filed in 2020, the two co-founders, Nitin Agarwal and Miles Paschini, describe their coin as a “tokenized crypto asset backed by sovereign debt.”
In an interview last Tuesday, Agarwal told CoinDesk that Yuga Coin, which in Sanskrit means the “joining of two things,” or in this case, “generations.”
“We aim to create multiple stablecoins that are government-friendly, Know-Your-Customer (KYC), anti-money laundering and Financial Action Task Force (FATF) compliant based on different currencies,” said Agarwal.
Each coin will be redeemable 1:1 against a corresponding national currency where they will be backed by national treasury instruments (including bonds and treasury notes) of the corresponding country.
Those stablecoins, intended to be created under the same Sanskrit banner and denominated in U.S. dollars or euros at first, are to be traded in a controlled network adjusted to rate the risk of trading with particular counterparties.
“The stability of the tokenized crypto asset is more akin to the stability of the government debt,” the patent reads, arguing that the instrument would be more stable than other cryptos pegged to a fiat currency because they are not reliant on a single banking entity holding the collateral.
The market competition for crypto-based instruments pegged to government debt like bonds and other securities isn’t so stiff. This is unlike Circle or Tether’s stablecoins that are pegged to the U.S. dollar. There’s an infiltration of so many of those into the market, hence the fierce competition.
“Avanti Bank does speak about stablecoins backed by banks which hold all funds in government securities and no fractional reserves,” said Agarwal. “However, in order to make this multinational and multicurrency, the bottleneck of a bank has to be removed, which is the approach we are taking.”
Coming at a time the FATF’s guideline now mandates digital assets and its developers to comply with the operating rules of traditional financial institutions, many digital asset innovators now strive to be more compliant with regulations.
And it’s the same with Yuga Coin and its founders.
The government debt-backed stablecoin seeks to incorporate regulatory-approved identity verification standards and an incorporated risk score that’s similar to that in traditional finance.
According to Agarwal, Yuga Coins would be verified by a regulated and trusted entity that is later recorded on-chain. Once a person has a verified identity in their wallet, the end-user is then in control of who can view their identity verification.
“We conceptualized this about three years back when the stablecoins market cap was less than $10 billion,” said Agarwal. “Today we see more people realizing this is the right way to run a stablecoin.”
The intention is to facilitate international government to corporations transactions, inter-government transfers fostering trade, global B2B and B2C transactions, and as a store of value among individuals.
Yuga’s design, according to Agarwal, has “innumerable possibilities” that offer a reliable means of holding and transacting money by supporting “multiple innovations.”
“This is the only way to make stablecoins more government-friendly that foster innovation in banking, payments, finance, capital markets, and asset registry by using blockchain,” said Agarwal.
He adds such stablecoins are capable of providing a global, decentralized, immutable, and auditable way of transacting, noting that “crypto is a solution to all anti-money laundering problems in the world and this project provides a way to achieve that.”
