Saga Monetary Technologies has finally launched its SGA stablecoin, and it's already planning to break away from its pegged basket of currencies.
SGA, the basket-backed stablecoin envisioned last year by the Saga Foundation, is a long-term play tailoring to two very different goals of the crypto market: being a (relatively stable) store of value and a free-floating asset all its own, according to Ido Sadeh Man, founder & chairman at the foundation
In doing so, it seeks to answer global regulators’ growing concerns over a stablecoin that could threaten stability. Largely spooked by Libra, the stablecoin project with a clear roadmap to mass adoption via Facebook, monetary authorities around the world have said unchecked stablecoins could have wide and negative implications.
As the U.S. Federal Reserve put it, “a loss of confidence” and run on the issuers could trigger “potentially severe consequences for domestic or international economic activity, asset prices, or financial stability.”
SGA’s seemingly contradicting ambitions give rise to a complex game plan. At launch, SGA will be a stablecoin through-and-through.
Its value will rely solely on the “basket of national currencies” whose collective worth backs up SGA’s list price. Meant to mimic the International Monetary Fund’s Special Drawing Rights, a currency-like reserve asset pegged to the dollar, euro, renminbi, pound sterling and yen, this “basket” will ensure SGA’s stable price.
Tokens will come into being as consumers buy in. Man said a smart contract issues new tokens to meet buyers’ orders and burns excess tokens as holders sell them back. It stores all proceeds with a network bank, the identity of which will be announced prior to launch, according to a spokesman.
Man said that reserve holder transparency will shore up any doubts regulators could have. The SGA's website will report the funds held in its reserves through daily attestations.
Its issuance model will slowly move away from the basket of fiat as holders buy in and signal their trust in its value. Over time SGA will become entirely unpegged, he said, and the value of the outstanding tokens will depend on how many are being held. This will prevent a run on the reserves, he said.
“There will always be enough money in the reserve to allow the contract to purchase all SGA tokens, although the price of SGA is dependent on the quantity of SGA in circulation at the time," he said.
Man also said that SGA front-loaded its regulatory due-diligence. He said SGA is in line with the European Union’s know-your-customer and anti-money laundering regulations and adheres to the Financial Action Task Force’s crypto asset guidelines.
He further said that SGA expects crypto regulation to continue to evolve.
One place it is actively evolving is the United States. In November, congressional representatives introduced legislation that would classify “managed stablecoins” as securities. The legislation is far from passing, though if it or similar legislation ever were, it could have broad ramifications across the stablecoin sector.
This uncertainty means SGA is staying out of the U.S. crypto market for now.
“Due to the current regulatory uncertainty with respect to cryptocurrencies, we have chosen to not allow US persons to onboard via our platform, at least at present," Man said.
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.