Tether, the stablecoin issuer, is expanding its product range with the launch of a new digital token representing a troy ounce of gold.
The token, called Tether Gold (XAUT), will be issued by a London-based commodities dealer called TG Commodities Limited.
On its website, Tether says one XAUT token will represent one troy ounce of gold on a London Good Delivery bar (a standard unit for the wholesale trading of gold, representing around 400 troy ounces). A troy ounce of gold is currently worth around $1563.
Tether, which advertises itself as offering ‘stable digital cash on the blockchain’, currently issues tokens backed by assets denominated in the US dollar, euro and Chinese yuan (renminbi).
The firm is facing allegations of fraud in the New York state courts, where the New York Attorney General has provided evidence that Tether’s high-profile US dollar token is less than fully backed by dollar reserves.
Tether has also been accused in recent class action lawsuits of having conspired with Bitfinex, a cryptocurrency exchange whose owners are believed to co-own Tether, to manipulate the price of bitcoin.
Market participants wishing to buy Tether Gold directly from the issuer, TG Commodities Limited, will have to do so in a minimum lot of 50 tokens (representing around $78,000 worth of told). Such purchases will incur a 25 basis point fee.
To redeem XAUT for gold, sellers will need to deposit at least 430 tokens with TG Commodities Limited, pay a fee of 25 basis points and the costs for the secure delivery of the gold.
Tether says it will not levy a custody fee on XAUT holders.
According to Tether’s website, retail investors will be able to trade XAUT on Bitfinex and RenRenbit, a Chinese firm which advertises itself as a crypto bank.
“I expect the demand for gold and the new digital gold of Bitcoin to grow and grow”
In a press release, Tether said that Tether Gold is the best way to hold gold.
“There is growing demand for digital exposure to physical gold, making the launch of Tether Gold a timely innovation in the crypto ecosystem,” said Paolo Ardoino, CTO at Tether.
“Tether Gold provides the combined benefits of both physical and digital assets, removing the drawbacks of holding gold in more traditional ways, such as high storage costs and restricted access.”
“Bitcoin has never existed during a financial crisis and its emergence as a store of value is growing,” Ardoino said.
“In the event of an economic or financial crisis, I expect the demand for gold and the new digital gold of Bitcoin to grow and grow.”
Tether’s entry into the gold token market follows the launch late last year of DGLD, a digital asset representing allocated physical gold stored in a Swiss vault.
The consortium issuing DGLD consisted of CoinShares, a London-based digital asset manager, MKS SA, a Swiss precious metals firm, and Blockchain, a provider of wallets, trading and research for cryptocurrencies and other digital assets.
While XAUT has no custody fee but charges creation and redemption fees, DGLD charges a 1 percent annual management fee, a transaction fee for each transfer of the token and a redemption fee for anyone wanting to take physical delivery of the precious metal. DGLD told New Money Review its gold holdings are insured against theft or loss.
And there’s also a difference in the mechanisms used to record token ownership: XAUT tokens are issued on the ethereum and TRON blockchains, but DGLD’s ownership records are linked to the bitcoin blockchain.
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