Launch of Euro stablecoin Lugh, backed by SocGen bank deposits

Launch of Euro stablecoin Lugh, backed by SocGen bank deposits

Today French startup Lugh announced the launch of a new Euro stablecoin on the Tezos blockchain, with associated bank deposits held by Société Générale and audits from PwC and Maghreb.

The announcement also says that French supermarket chain Groupe Casino (2020 revenues €32 billion / $36 bn) has plans to use the stablecoin both as a means of payment and for rewards.

We reached out to all three enterprises for confirmation. Société Générale confirmed, but we did not receive a response in time for publication from the others.

Initially, the stablecoin will only be available on the French cryptocurrency exchange Coinhouse. However, the announcement clarifies that the coin is intended as a first step for other blockchain applications that will leverage it, such as the supermarket chain.

The tokens EUR-L will be backed one for one by euros held in a Société Générale dedicated account. One question relates to the regulatory position. The startup states the coin “has been presented to the French regulatory authorities and is willing to comply with the current regulatory framework.” Lugh’s capital is €10,000.

It’s not the first euro stablecoin. In terms of regulated ones, Raiffeisen Bank has its euro RBI Coin, created in association with Billon, which holds an e-money license. And German bank Bankhaus von der Heydt partnered with Bitbond for a stablecoin on the Stellar network.

Other companies involved in the Lugh solution include French Tezos developer Nomadic Labs (which also has a SocGen link) and SCEME, which developed Lugh’s stablecoin platform.

Meanwhile, the European Union is currently considering its draft regulations for Markets in Crypto-Assets (MiCA). The European Central Bank responded to the draft stating it’s keen to ensure that central banks have veto rights over stablecoin issuers. It also has concerns that stablecoins could cause problems because bank interest is in negative territory in the Euro area and holding stablecoins is cost-free. In other words, stablecoins might prove more attractive compared to bank accounts.

However, that begs the question: what’s the business model for the stablecoin issuer given it has to keep deposits in a bank account? This is perhaps why Lugh is emphasizing blockchain applications.

Thai Central Bank Declares Baht-Pegged Stablecoin Illegal in Violation of Currency Law – Regulation Bitcoin News

Thai Central Bank Declares Baht-Pegged Stablecoin Illegal in Violation of Currency Law

Thailand’s central bank has declared a stablecoin pegged to the Thai Baht illegal, citing violation of the country’s currency law. The Bank of Thailand (BOT) is currently working on a regulatory framework for stablecoins.

Thailand Bans Baht-Pegged Stablecoin

The Bank of Thailand, the country’s central bank, issued a press release Wednesday declaring a stablecoin called the Thai Baht Digital (THT) illegal.

“It has come to the BOT’s attention that a new stablecoin, THT, has been created abroad on the Terra platform. One unit of THT is denominated in and valued at one Thai baht,” the announcement describes.

The central bank claims that “Although THT is currently not used as a medium of exchange, it could cause fragmentation to the Thai currency system should THT or other similar stablecoins come to replace, substitute or compete with baht issued by the BOT,” asserting:

This would ultimately affect the general public’s confidence in the stability of the national currency system, which is the cornerstone of all economic activities. Therefore, any activity involving THT is deemed illegal, as the creation, issuance, usage or circulation of any material or token for money is a violation of Section 9 of the Currency Act 1958.

Following the announcement regarding the stablecoin THT, the Bank of Thailand said that it expects to issue regulations on stablecoins this year, Reuters reported Friday, citing a BOT assistant governor, Siritida Panomwon Na Ayudhya.

The central bank “will regulate foreign currency-backed stablecoins, asset-backed stablecoins, and algorithmic stablecoins that are not illegal,” the assistant governor revealed, noting that this regulation will not cover cryptocurrencies such as bitcoin and ether.

She further explained that under the new regulation, “service providers of baht-backed stablecoins would need central bank approval as they may be classified as electronic money (e-money) and the BOT oversees risks associated with e-money, such as settlement and money laundering.”

What do you think about the Thai central bank declaring the stablecoin illegal? Let us know in the comments section below.

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BoT warns against any use of THT stablecoin

BoT warns against any use of THT stablecoin

The Bank of Thailand is warning people to refrain from participating in any activities involving Thai Baht Digital (THT), as there are no legal assurances or protection with it and users could be at risk of cybertheft or money laundering.

Pruettipong Srimachand, the central bank’s assistant governor of the legal group, said any activities involving the new stablecoin THT that was created abroad on the Terra platform are considered illegal. The creation, issuance, usage or circulation of any material or token for money is a violation of Section 9 of the Currency Act 1958.

The central bank said recent developments have seen the private sector attempting to create cryptocurrencies using underlying assets or fiat currencies as an anchor to minimise price volatility. Such cryptocurrencies are known as stablecoins.

More recently, a new form of stablecoins using underlying algorithmic smart contracts was created to replicate the price and movement of various currencies. One unit of the stablecoin THT is denominated in and valued at one baht. Although THT is not used as a medium of exchange, it could cause fragmentation of the Thai currency system should THT or other stablecoins come to replace, substitute or compete with baht issued by the central bank, he said.

“Such usage would ultimately affect the general public’s confidence in the stability of the national currency system, which is the cornerstone of all economic activities,” said Mr Pruettipong.

In a separate development, the Bank of Thailand announced it plans to stop using Thai Baht Interest Rate Fixing (THBFIX), the existing reference rate which incorporates the London Interbank Offered Rate (LIBOR) for interest rate calculation, after June 30, 2023, in line with the upcoming plans to phase out the LIBOR.

The central bank is the THBFIX regulator and it uses the US dollar LIBOR format to calculate rates. The bank announced it will inform commercial banks of the terms of the THBFIX rate through existing channels until its usage comes to an end.

The Bank of Thailand plans to stop new TBHFIX-based financial calculations including loans, debentures and derivatives from July 1 of this year.