Crypto giant Tether introduces new digital token backed by gold
Cryptocurrency | Representative
Tether holdings, issuer of the largest stablecoin, is making waves with a new synthetic dollar backed by gold. This comes amid Tether's ambitions to expand beyond USDT stablecoin, a token worth $112.5 billion, backed by the US dollar.
Stablecoins are cryptos pegged to some external reference. The word 'stable' highlights their nature compared to other volatile cryptocurrencies.
This latest invention also highlights the trend of ‘de-dollarisation’ & how it’s spreading beyond regular financial dealings to the crypto kingdom.
This new gold-backed stablecoin operates on tether's novel platform - Alloy by tether.
Built on the Ethereum blockchain, the platform, Alloy, allows users to mint tokens by depositing tether gold, another tether token representing the value of physical gold. This double-collateralised approach aims to ensure stability.
This launch comes at the backdrop of Tether reporting a profit of $4.5 billion in the first quarter of 2024. However, the industry faces ongoing scrutiny from regulators, particularly regarding the liquidity of reserves and their ability to withstand mass redemption requests.
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This launch also marks a significant step towards portfolio diversification beyond the US Dollar. This new gold-backed token offers an open ecosystem for creating various tether assets. While the initial focus is on aUSDT, the platform's design paves the way for potential products with strong returns.
This also resonates with the gold standard used in monetary system until 1971, when US President Richard Nixon terminated this method.