Tether Introduces a “Synthetic” Dollar Backed by $570 Million in Tokenized Gold

Using $570 million in tokenized gold as backing, Tether launches the Alloy platform, enabling the minting of USDT exceeding $110 billion.

TakeAway Points:

  • Tether introduced Alloy, a platform that allows users to create synthetic digital assets secured by tokenized gold (XAUT), with a USDT based on the value of the US dollar at first.
  • The new platform allows users to mint a USDT by depositing XAUT, which has a $570 million market cap and is backed by physical gold in Switzerland.
  • This initiative fits in with Tether’s larger plan to grow beyond USDT into other markets, such as cloud computing-based AI, bitcoin mining, and payment processing.

Tether’s Alloy Minting Platform

Tether, the company behind the $110 billion stablecoin USDT, has launched a new token minting platform called Alloy on the Ethereum network. This platform allows users to create tokens collateralized by Tether’s tokenized gold (XAUT). 

“Alloy by Tether is an open platform that allows to create collateralized synthetic digital assets and will soon be part of the new Tether digital assets tokenization platform, launching later this year.” According to Tether CEO Paolo Ardoino.

The platform may also offer yield-bearing products in the future, as stated in a press release.

The first asset available on Alloy is aUSDT, a token pegged to the U.S. dollar. Investors can mint aUSDT by depositing Tether’s XAUT as collateral. XAUT, which has a market capitalization of $570 million, is backed by physical gold stored in Switzerland.

The aUSDT token is designed for users who want to use crypto for payments and remittances without selling their gold-backed tokens. The position needs to be overcollateralized, with the number of new tokens users can mint capped at 75% of the collateral value. The asset issuance will be handled by Moon Gold NA, S.A. de C.V., and Moon Gold El Salvador, S.A. de C.V., regulated under El Salvador’s National Commission of Digital Assets (CNAD).

This new offering is part of Tether’s broader strategy to expand its services beyond issuing USDT. The company has recently invested in bitcoin mining, payment processing, and artificial intelligence via cloud computing. Ardoino also outlined plans in April to launch a tokenization platform that would facilitate the creation of digital versions of various assets, including bonds, stocks, funds, and loyalty reward points.

Stablecoins: The Financial Stability Board’s Main Focus

The Financial Stability Board (FSB), which monitors the global financial system for systemic risk, announced it will undertake further work on the challenges posed by stablecoins in emerging and developing economies. 

This decision was made during a meeting in Toronto of the FSB’s plenary, the sole decision-making body of the standard-setting and advisory organization. The FSB has been a key player in global crypto policy, having framed a joint policy paper with the International Monetary Fund last year, warning against blanket bans to mitigate risks associated with the sector.

“In emerging market and developing economies (EMDEs), crypto-assets pose particular challenges for monetary policy and capital flow management,” the FSB stated.

“Members discussed the challenges posed by the relatively higher levels of adoption and risks of global stablecoin arrangements in EMDEs. The FSB will undertake further work to consider how these challenges can be addressed.”

Stablecoin regulation has been a contentious issue between the Group of 7 (G7) industrialized nations and the larger G20, with differences remaining unresolved even after a G7 summit in Italy last week.

Outflows from Bitcoin Investments

Bitcoin investment products experienced significant outflows last week, totaling $621 million, according to asset manager CoinShares. This was the largest outflow since March 22 and was driven entirely by BTC’s losses. Across the broader digital asset ecosystem, investment products saw net outflows of $600 million. Grayscale’s GBTC was the worst affected, with $273 million in outflows.

These outflows offset minor inflows for a broad selection of altcoins, including ETH, LIDO, and XRP. The mixed economic signals from the U.S. contributed to this trend. U.S. inflation data for May, as measured by the Consumer Price Index (CPI), was reported to be flat for the month, beating expectations. 

However, the Federal Open Market Committee (FOMC) of the Federal Reserve held its benchmark rate range at 5.25%-5.50% and projected just one 25 basis point rate cut this year. This hawkish stance led to Bitcoin tumbling to its lowest point in four weeks on Friday at $65,100. At the time of writing, BTC was flat at $66,000, and the CoinDesk 20 Index (CD20), which measures the performance of the broader digital asset market, was 1.75% lower.

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