Tether Holdings Ltd., the issuer with the most U.S. dollar pegged stablecoins outstanding, has announced a new evolution in the crypto revolution: a synthetic dollar backed by gold. This innovative move by Tether underscores its ambition to diversify beyond its flagship USDT stablecoin. USDT, now considered “plain vanilla,” in the crypto world has a market capitalization of $112.5 billion and is backed with reserves of U.S. Treasury bills and other securities.
What Does Tether Do?
Tether is a digital currency backed by other assets. It is designed to facilitate transactions and provide a stable store of value in the volatile cryptocurrency market. Its aim is to maintain a 1:1 value of $1.00. It was launched in 2014 by Tether Ltd., a company that says that each USDT token is backed by an equivalent amount of USD held in reserve.
The Alloy by Tether Platform
Tether’s new offering is built on the Alloy by Tether platform, which was developed by two members of the Tether Group: Moon Gold NA S.A. de C.V. and Moon Gold El Salvador S.A. de C.V.
Alloy is designed to be an open platform that can be employed to create a wide variety of tethered assets. According to Tether, the Alloy platform could even allow for the creation of digital assets that include yield-bearing instruments.
The aUSDT Currency
The new aUSDT currency is aimed at users who want to make transactions, payments, and remittances with a currency similar to the U.S. dollar without having to sell their gold-backed digital assets. Tether Gold (XAUT), the underlying asset for aUSDT, has a market capitalization of approximately $573 million and is backed by physical gold stored in Switzerland. The position needs to be over-collateralized, which, in this case, means that the amount of new tokens users can mint is maximized at 75% of the physical gold’s collateral value.
Tether’s new offering comes as the company continues to expand its services beyond issuing USDT. The company has recently invested in bitcoin mining, payment processing, and artificial intelligence via cloud computing.
Regulatory Scrutiny and Financial Performance
Tether has faced increased scrutiny from regulators regarding the quality of assets backing stablecoins like USDT. In 2021, Tether reached settlements with the New York Attorney General and the Commodity Futures Trading Commission (CFTC) over allegations related to reserves disclosure and transparency. Despite these challenges, Tether has been financially successful, generating a profit of $4.5 billion in the first quarter of this year. The value of Tether’s USDT has been able to track the dollar one-for-one without any major depegs in recent years.
Key Takeaway – Gold-Backed Synthetic Dollar Is a Game-Changer
Tether’s new gold-backed synthetic dollar is a game-changer in the cryptocurrency market. The new offering provides a new avenue for users to engage in transactions and payments using a currency similar to the U.S. dollar without the need to sell their gold-backed digital assets. As Tether continues to expand its services and diversify its offerings, it remains to be seen how this new synthetic dollar will impact the cryptocurrency market and the broader financial landscape.
