The rampant currency depreciation being witnessed across many emerging markets has intensified the case for decentralized cryptocurrencies like Bitcoin and USDC as stores of value, or hedging assets.
But gold is the most valuable asset in the world and remains highly sought after as a hedge against inflation and a store of value through market ups and downs.
Enter Tether Gold. Tether Gold (XAUT) is a digital asset that is pegged to the value of gold. Each unit of Tether Gold is linked to the price of one troy ounce of physical gold, which is stored in a vault.
Launched in 2020 by TG Commodities Limited, Tether Gold (XAU₮) is a stablecoin that provides ownership on a 1:1 basis of one fine troy ounce of gold on a physical bar of gold that meets the Good Delivery standard of the London Bullion Market Association (LBMA).
According to Tether Gold, this technology allows access to a stablecoin that provides ownership of physical gold while avoiding the drawbacks associated with physical gold, such as high storage cost and limited accessibility.
What is Tether Gold?
The Tether Gold website states: “Holders of XAUT obtain the combined benefits of both physical and digital assets. XAUT token holders will be able to enjoy ownership of gold while avoiding drawbacks associated with physical gold, such as high storage costs and limited accessibility.”
“Unlike fiat paper currency, coins or other assets, gold has maintained its value throughout the ages. People see gold as a way to pass on and preserve their wealth from one generation to the next.”
In an interview with BitKe, Tether’s Chief Technology Officer Paolo Ardoino added that Gold is an excellent hedge against inflation because its price tends to rise when the cost-of-living increases. In this unprecedented time in which central banks print more money than ever,Gold is a great choice to store your wealth because of its scarcity.
According to Tether, putting gold on a blockchain unlocks a variety of characteristics that typically only crypto assets possess:
- Tether Gold tokens provide undivided ownership rights to gold on the specified gold bar(s). the allocated gold is identifiable with a unique serial number, purity and weight, so the XAU₮ holders can easily check the details of the gold bars associated with their address.
- Owning physical assets on the blockchain provides you with the combined benefits of both physical and digital assets. As a XAUt token holder you will be able to enjoy ownership of gold while avoiding drawbacks associated with physical gold, such as high storage costs and limited accessibility.
- Another advantage is the constant availability of a digital token. Tether Gold tokens are available on markets operating 24 hours a day, seven days a week. It means that when the traditional markets for gold are closed, it’s still possible to buy or sell Tether Gold tokens.
- With Tether Gold tokens we have the possibility to redeem them for physical gold or USD fiat currency.
Advantages of Tether Gold
One of the main advantages of Tether Gold is that it provides investors with exposure to gold without the need for physical ownership. This means that investors do not have to worry about the storage and insurance of the metal, which can be costly and cumbersome.
Second, the cryptocurrency is an ERC-20 token, meaning it can be moved easily on the Ethereum blockchain and transferred to different addresses. Tether Gold holders have ownership rights to specific physical bars and can identify the details with a unique serial number. They can even redeem their tokens for the real thing by going through a verification process.
“The holder’s physical gold can be delivered to a location of their choice in Switzerland or the holder can request that TG Commodities Limited attempt to sell the gold and receive the cash proceeds from that sale.”
Compared to other crypto assets, Tether Gold is also a stable investment tool, which means that it is less volatile than other digital assets that are not backed by any underlying assets.
As such, Tether Gold provides investors with a way to diversify their portfolio by adding an asset that has traditionally been considered a safe haven. Gold has historically been viewed as a reliable store of value, and Tether Gold allows investors to combine the security of gold with the convenience and accessibility of a digital asset.
Stablecoins have faced negative publicity due to the fall of TerraUSD (UST), which is now known as TerraClassicUSD (USTC). Previously considered a secure investment option, UST experienced a decline in its value and fell below the $1 threshold, plunging to less than $0.01 in early 2022.
Most recently USD Coin (USDC) lost its dollar peg and slumped to an all-time low after Circle, the US firm behind the coin, revealed some of the reserves backing it were held at Silicon Valley Bank.
And in February Binance acknowledged that a bug in its system resulted in at least $1 billion in under-collateralization of BUSD, one of the company’s stablecoins.
On a positive note, Tether USD has maintained its position as the most valuable stablecoin, making gains as its main competitors experienced challenges. The coin gained $1 billion in market capitalization as crypto investors fled Binance USD (BUSD), which came under regulatory scrutiny in February.
Tether Gold is a digital asset that provides investors with a stable and secure way to invest in gold. It offers a convenient way to invest in gold without the need for physical ownership, making it a useful tool for investors who want to diversify their portfolios as well as a safe haven against currency depreciation and inflation.