SEBA Bank, through the Ethereum blockchain, is launching a new cryptocurrency that enables investors to own physical gold stored in Swiss vaults. The Swiss bank’s new digital coin exists as an ERC-20 token. This implies that it is traded and custodied on the second-largest blockchain in the world.
The new product uniquely differs from the conventional digital gold products since it is stored on a blockchain. Traditional digital gold products are not stored on my blockchain and only serve as IOUs from a provider. The new product also offers a higher level of security since blockchains do not need any third party to validate ownership of digital assets.
Rather, a decentralized ledger available to all investors within the network is used. This ledger helps to manage a single, irrefutable record of all transactions. This system is also augmented by Ethereum’s multi-party smart contracts which offer an extra layer of functionality. For instance, it can validate serial numbers of every gold bar that has been allocated to distinct digital assets.
A Milestone Achievement
SEBA Bank’s chief executive, Guido Buehler, asserted that the new gold token is a milestone advancement for the precious metal industry. His claim isn’t because the product is the first of its kind but because SEBA Bank has a track record for institutional-grade regulatory compliance.
Bueller also emphasized that the token is controlled by a Swiss bank issued with a banking and securities dealer license. He went on to say that institutional investors can fully trust the token platform to offer adequate security for their investments. To add to his explanations, Bueller mentioned that legislated Swiss firms are charged with holding the physical gold. This is to ensure that the security of assets is held high for both the physical and digital nature of the product.
Investors who hold the new gold token can claim their physical gold at any time from refineries in partnership with SEBA Bank. The physical gold can be redeemed on demand without incurring extra fees on storage and transport charged by conventional digital gold platforms.
New Gold Token as a Stablecoin
Each of the new gold tokens represents 1g of the precious metal. This can be further divided into 4 decimal places. The dollar equivalent of one gold token is then placed at $57. This implies that it can be utilized as a fully compliant stable country in crypto marketplaces. The new gold token can effectively mirror the functions of fiat stable coins like USDC and Tether (USDT) at bitqh
Generally, investors when selling their crypto assets like Bitcoin, and Etherum they prefer to keep their gains in stable coin forms. This is because stablecoins offer less volatility, easier to trade and lend out interest. Stablecoins have these characteristics because they are pegged to a fiat currency (usually the US dollar). By adding a gold stablecoin to investment portfolios, investors can further replace some of their crypto assets exposed to exchange rate volatility and inflation with exposure to commodity prices.
SEBA Bank: Not the first player in the game
SEBA Bank isn’t the first firm to identify investors’ demand for this type of hedge. Paxos, a New York-based stablecoin company in 2019 launched the PAX Gold (PAXG) token. Paxos pegged its value to one troy ounce of gold. PAXG today is traded on market-leading exchanges like FTX, Kraken, and Binance. The token is also used by investors to earn interest on centralised exchanges
like Blockfi, Celsius, and Nexo.
Crypto exchange platforms such as Blockchaim.com and Exchange Uphold have also launched their gold-backed tokens DGLD and UPXAU respectively.
SEBA is ready to cater to investor demands and their need to get exposed to a broad range of digital assets. Buehler claims SEBA will be able to meet the demands of investors looking to invest in crypto yield products, tokenized stablecoins. Not just that, SEBA is offering investors access to the gold market in the form of a cost-effective, future-proof, and regulated digital token.
As regards the new gold token, there are no updates from SEBA as to whether clients will be able to earn yield from the token. However, SEBA recently launched earning and staking services for several crypto assets including Cardano (ADA) and Polkadot (DOT). Hopefully, this is a hint that investors will be able to earn a yield on the new gold coin.