Tether Launches Gold-Backed ‘Synthetic’ Dollar Stablecoin

Tether on Monday launched Alloy, a gold-backed stablecoin pegged to the US dollar. This marks the issuer’s tethered asset debut, with Alloy (aUSDT) mintable through the new platform.

Tethered assets are “designed to track the price of a specific reference asset, such as the US Dollar,” the company said. They accomplish this using stabilization techniques such as over-collateralization. This involves holding collateral valued higher than the assets issued, along with secondary market liquidity.

Tether Gold (XAUt), a token representing physical gold ownership, will back Alloy. It will maintain its value relative to the US dollar. Essentially, Alloy is classified as a “synthetic” dollar, aiming to replicate the US dollar’s value and utility without direct backing. This means there is no direct dollar-for-dollar backing.

2/ Tethered Assets are digital assets that aim to track the reference price of another asset through different stabilisation mechanisms.

— Alloy by Tether (@Alloy_tether) June 17, 2024

Tether Taps Into El Salvador’s Regulatory Expertise for aUSDT Issuance

The first asset offered on the platform is Alloy, which maintains a stable value tied to the US dollar. Investors can mint the token through depositing Tether Gold as collateral. Backed by physical gold held in Switzerland, Tether Gold has a market capitalization of $570m.

Allow is aimed at users interested in utilizing cryptocurrency for payments and remittances, while retaining their holdings of gold-backed tokens without liquidating them. Users must overcollateralize their positions, allowing them to mint new tokens up to 75% of the collateral value.

Further, Moon Gold NA and Moon Gold El Salvador will oversee the asset’s issuance, operating under El Salvador’s National Commission of Digital Assets (CNAD).

Notably, the move comes after a public spat in May. At the time, Tether’s CEO Paolo Ardoino countered concerns from Ripple’s CEO about potential government action against Tether. Interestingly, Ripple teased the launch of its own competing stablecoin in June.