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X8 AG statement on UST


Baar, Switzerl - May 13, 2022 ( Newswire) As an imminent player in the global stablecoin sector, X8 AG hereby issues this statement as a way of supporting the development of regulated stablecoins and their broader applicability to the way the world transacts.

The meltdown of UST, one of the largest stablecoins that dropped over 70% from the USD parity on 11 May, has caused ripple effects in the crypto market and triggered reactions by the regulators - pledging rapid action. In what follows, we offer a QuickTake as to what happened UST and we illustrate the distinct features which differentiates the X8 Global Stablecoin System from UST.

QuickTake: UST is an algorithmic stablecoin, which passes on the price risk to another token LUNA. Algorithmic stablecoins are model-dependent in their price determination, and their ability to ensure parity is highly dependent on the assumptions underlying the model. Under circumstances the algorithm may not really reduce any risk, and this is exactly what happened to UST. The algorithm did not balance the risk which occurred when on-chain selling lowered the value of UST and its value further depreciated when off-chain selling began.

X8 is creating a global stablecoin system from the ground up and it will be fully regulated by design. Switzerland is the most advanced regulatory framework for digital assets and X8 believes that structuring its stablecoin system under Swiss law is the best starting point to achieve a global X8 cross-border framework over time.

X8 - Efficient payments and value preservation stablecoins

  • X8 stablecoins, of which we plan to have 8 single currency-denominated over time, and 1 basket coin, are not in the category of algorithmic coins. X8 stablecoins will be backed by cash, not by algorithmic processes.
  • X8 stablecoins can only be issued and exist against a 100% fiat backing. Owners of single currency-denominated stablecoins can easily transact wallet to wallet, efficiently and anytime.
  • It will only be possible to issue the X8 basket stablecoin against 100% fiat backing. Our algorithm will relocate this cash between the currencies in the basket and preserve its value over and above keeping the value stable. Our proprietary risk management algorithm system underpinning the X8 basket stablecoin extends the stability principle into a value preservation one

X8 - Redemption parity & regulated by design

Two other fundamental features distinguish X8 stablecoins from UST. X8 coins will offer the redemption claim attached to them, granting the user the legal claim against the assets backing up the stablecoin. Secondly, per regulatory design, the funds backing the stablecoins will not be exposed to risky activities. The universe of investable assets is very limited to the most liquid and safest traditional financials assets, and any incremental risk will be subject to prevailing and applicable regulatory capital requirements.

Concluding, X8 AG founder and CEO Gregor Koželj commented "Resulting from the UST event which has rocked the crypto markets, international regulators have reacted strongly and their attention and regulatory actions towards stablecoins will accelerate. Stablecoins that are not regulated will come under pressure. The biggest pressure will go to stablecoins not backed 100% by fiat deposits, or by low-risk assets. Projects such as X8 have anticipated the trend and will naturally benefit from a first-mover advantage. In the mid to long-term we speculate that only stablecoins fully regulated as per applicable banking and financial regulation will prosper. We invite all stakeholders to remain committed to continued innovation and bravery as we build new financial instruments which meet the needs of the new global mindset permeating the world".

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