By
Chimamanda U. Martha
April 12th, 2024
SGA, the basket-backed stablecoin, that was announced by the Saga Foundation last year, has gone live.
Saga Monetary Technologies announced on Tuesday it decided to launch its SGA stablecoin that is pegged to a basket of currencies. The Saga Foundation said it was planning it since the last year to become a long term playing asset. However, it is meant to tailor to pretty much different goals of the crypto space.
One is acting as a stablecoin as it is and another, to act as a free-float asset. Ido Sadeh Man, founder and chairman at the organization said the main idea behind the whole project was to try to answer concerns amid global regulators over every digital asset that they see as a danger to the stability. Man even mentions Facebook’s Libra as an example of a threat to regulators who like to look upon more traditional assets. He says Libra clearly has an obvious intention to become massively adopted and because of it, monetary authorities around the globe said unregulated stablecoins could have wide and negative implications.
As per the U.S. Federal Reserve, “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.”
However, even though the prime plan for SGA is to be stablecoin, its value will be based only on the “basket of national currencies” whose collective worth will act as a back up of the SGA’s list price. Saga ties its token value to bank deposits in currencies represented in the International Monetary Fund’s (IMF) special drawing rights (SDR).
The basket is composed of dollars, the euro, Chinese yuan, Japanese yen and British pound. As opposed to Libra, Saga won’t take profit from its token as it is only acting as its issuer. Without the existing wallet, users will be able to purchase SGA tokens directly on the company’s website while the cryptocurrency exchange Liquid is charged for its listing.
SGA’s issuance model will slowly move itself from the basket of fiat as the holders start purchasing and showing their trust. There is a possibility, claims Man, that SGA becomes entirely unpegged and the value of its tokens will rely on the quantity being held. This will prevent a run on the reserves, he said.
Man explained:
“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.”
Man added SGA is totally in line with the European Union’s know-your-customer and anti-money laundering regulations and is attached to the Financial Action Task Force’s crypto asset guidelines. However, he mentioned, the SGA expects crypto regulation to continue to evolve.
Still, as Saga isn’t regulated, it won’t be launched in the U.S.
Man added:
“We only want to operate where it is clear we are respecting compliance.”
He does, however, hope that the U.S. regulatory picture will look clearer in the future.
With an advisory board that includes top economists like Nobel Prize-winner Myron Scholes, we hope this U.K.-based company will succeed in introducing a global currency that regulators find agreeable.