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Tether tokenizes gold on Ethereum and TRON

30 Jan 2020, 00:00, ,

Stablecoin company Tether has announced the launch of a new gold-pegged stablecoin called Tether Gold. The tokenized gold coin will operate on both the Ethereum and TRON blockchain as an ERC-20 and a TRC-20 token, and represent one troy fine ounce of gold.

Tether, best known for operating the world’s leading stablecoin USDT, has put “physical gold” onto the blockchain, enabling anyone with an internet connection to hold gold in tokenized form.

Physical gold on the Blockchain

One XAU₮ token represents one troy fine ounce of a specific London Good Delivery gold bar. The asset-backed token comes in two forms, ERC-20 and TRC-20, and can be transferred on-chain on both the Ethereum and the TRON blockchains. Additionally, Tether will not charge custody fees for holding the gold that each token represents.

“There is a growing demand for digital exposure to physical gold, making the launch of Tether Gold a timely innovation in the crypto ecosystem. 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,” said Paolo Ardoino, CTO at Tether.

Bitfinex, a sister company of Tether, is the first exchange that has launched Tether Gold trading. The new gold token can be traded against the US dollar, Tether, and Bitcoin.

Should trading volumes for XAU₮ indicate that there is a demand for the gold-backed asset, we can expect other exchanges to follow suit and list the coin on their platforms.

Can you trust Tether Gold?

As we learned in April 2019, Tether has misled the public and USDT users as to whether the dollar-backed coin is backed 1-to-1 by US dollars. Instead, the digital asset was only 74% backed by dollars, according to a company lawyer. Prior to this announcement, the company had repeatedly claimed that the stablecoin was fully backed by the U.S. dollar even in light of substantial skepticism and a call for a public audit.

While the market has accepted that USDT is not fully-backed and continued to use the asset, the company’s reputation has suffered. As a result, it is difficult to envision investors fully trusting Tether’s new tokenized gold offering.

The company claims in a press release that it “has direct control over the physical gold storage, safely held in a Switzerland vault.” Additionally, Tether states that it is using “best in class security and anti-threat measures,” to secure its investors’ gold.

However, since the company has lied in the past about the degree of asset-backing for one of its tokens, investors will likely tread carefully.


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