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Unlike fiat currency-pegged stablecoins, Yuga Coin intends to be solely pegged to government debt such as bonds and treasury notes.
Two co-founders of the Puerto Rico-based digital FV Bank say they have become the first in history to be awarded a U.S. patent for a stablecoin design based solely on government debt.
The patent application, filed last year on the back of a pre-existing patent by Nitin Agarwal and Miles Paschini, describes their instrument as a “tokenized crypto asset backed by sovereign debt.”
Its working name is Yuga Coin, which in Sanskrit means the “joining of two things,” or in this case, “generations,” Agarwal told CoinDesk in an interview on Tuesday.
“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 argument goes that these 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 stability of the tokenized crypto asset is more akin to the stability of the government debt,” the patent reads.
While the market is currently flooded with various versions of stablecoins pegged to either commodities or fiat currency (think USDT (+0.03%) and USDC (-0.01%)), the competition for such an instrument pegged to government debt is scarce.
“Avanti Bank (Caitlin Long) 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.”
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