Stablecoin Policy Guidelines Issued by Bank of Thailand
On March 19, 2021, the Bank of Thailand (BOT) issued policy guidelines on how stablecoins are to be regulated. These were issued following the BOT’s recent ruling that stablecoins pegged to the Thai baht violate the Currency Act B.E. 2501 (1958).
Stablecoins were developed to offer a more price-stable alternative to traditional cryptocurrencies, which are defined under Thai law as digital units created to serve as means of exchange for goods, services, or any other rights. As traditional cryptocurrencies (such as Bitcoin) have no underlying assets, they are subject to such extreme fluctuations in value, and therefore people often hold them as investments rather than spend them as currency.
Some stablecoins are pegged to the value of a specific fiat currency, such as the Thai baht, and are sometimes even intentionally created to mirror that fiat currency in name, denomination, and value. The BOT reasoned that such stablecoins—seemingly created to replace Thai baht currency—violate the Currency Act B.E. 2501 (1958), because the public might incorrectly consider them a parallel baht currency.
The BOT’s subsequent policy guidelines on how stablecoins are to be regulated address both baht-pegged stablecoins and those pegged to other currencies or assets.
Stablecoins pegged to the Thai baht (or “baht-backed stablecoins”) that are intended to be used as a means of payment may be considered electronic money (e-money) under the Payment Systems Act B.E. 2560 (2017), which is regulated by the BOT. This type of stablecoin has similar characteristics and risk factors to existing e-money, for which the BOT has issued regulations governing various aspects such as settlement, money laundering, cybersecurity, and consumer protection. Consequently, business operators who intend to launch baht-backed stablecoins in the Thai market should consult with the BOT before doing so. To support their determination on this issue, the BOT notes that their position is consistent with those of other countries, such as Singapore, the UK, and Japan.
The BOT confirmed that stablecoins pegged to foreign currencies or other assets, including those with value backed by a digital mechanism rather than an asset (i.e., algorithmic stablecoins) are currently unregulated. However, the BOT is studying this topic and is open to receiving comments and feedback before deciding whether and how these stablecoins should be regulated.
The BOT itself is developing a cryptocurrency called a retail-type central bank digital currency (CBDC), similar to Digital Yuan of the People’s Bank of China and other government-developed digital currencies, to be freely used by the general public as a stable exchange of value for goods and services. The BOT believes that, when compared to privately issued stablecoins, a CBDC will be more secure and efficient and can meet the demands of all users and business operators.
Cryptocurrency and stablecoins are now at a regulatory crossroads, with Thai regulators set to determine their future. Conceptually, neither traditional cryptocurrency nor stablecoins are regulated under the Emergency Decree on Digital Asset Business Operation B.E. 2561 (2018), but businesses related to them are. The recent BOT rulings indicate some skepticism by Thai regulators toward stablecoins—especially those pegged to the Baht—and the possibility that their widespread introduction into Thailand could create a new and unregulated financial ecosystem that adversely impacts the stability of the financial sector, and by extension the country’s economic development. Nevertheless, the BOT well recognizes this technological development and is therefore actively engaging with it.
Visa supports transaction settlement with USDC stablecoin – TechCrunch
Payment card network Visa has announced that transactions can be settled using USD Coin (USDC), a stablecoin powered by the Ethereum blockchain. Crypto.com is the first company to test the new capability with its own Visa-branded cards.
USDC is a stablecoin co-founded by Circle and Coinbase and by managed the Centre consortium. As the name suggests, USDC is a cryptocurrency that follows the value of USD. One USDC is always worth one USD — hence the name stablecoin.
In order to make sure that the value of USDC remains stable, USDC partners keep USD on bank accounts every time they issue new tokens. Those accounts are audited to make sure that there are as many USDC in circulation as there are USD in those accounts.
So why do stablecoins exist even though money is mostly digital these days? Like other crypto assets, stablecoins present some flexibility when it comes to sending, receiving and storing value. You don’t need a bank account and everything can be easily programmable. And you don’t need to support legacy systems, integrate with banks and pay transaction fees to other financial institutions.
While USDC originally started as a token on top of the Ethereum blockchain, USDC also supports two other blockchains — Algorand and Stellar. Visa has chosen to focus on the Ethereum variant of USDC for now.
The payment company already supports 160 currencies across the globe. That’s why you can seamlessly use your Visa card when you travel abroad. You’ll see a card transaction in your home currency on your card statement, but the merchant gets paid in their own local currency.
Thanks to a partnership with Anchorage, Visa is adding support for its first digital currency. Anchorage recently received a federal banking charter and is positioning itself as a digital asset bank. Visa was probably looking for a trustworthy partner for this program. As Anchorage got a thumbs-up from regulators, the partnership makes sense.
For Crypto.com, it means that it can send USDC directly to Visa. For instance, if a Crypto.com customer holds USDC in their wallet and makes a card transaction, Crypto.com doesn’t have to first convert USDC tokens to USD.
It can send USDC to Visa’s Ethereum wallet address at Anchorage to settle the transaction. The merchant then gets paid by Visa in their own currency. Visa says there will be more partners down the road in addition to Crypto.com.
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Fei Labs raises over $1.2 billion for its stablecoin project
Fei Labs, the firm behind the Fei Protocol stablecoin, raised 639,000 ETH, roughly $1.27 billion at current prices, in commitments for its Fei Protocol stablecoin on Saturday.
The ETH raised will be used as collateral to mint Fei stablecoins. According to Fei Labs, over 17,000 unique addresses participated in the “Genesis” event of the Fei stablecoin. As The Block Research writes, the Fei stablecoin uses a “Protocol Controlled Value” to sell and buy back supply to maintain its $1 peg. The Fei Protocol also disincentivizes sellers of its stablecoin below its peg by enacting a growing burn penalty for Fei sales.
With its raise, Fei Labs also provided liquidity on Uniswap, immediately making it the largest pool on the decentralized exchange with over $2.6 billion in liquidity.