Tether launches gold-backed token to stabilize market

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A new gold-backed asset class has been introduced by Tether, a leading stablecoin issuer, in order to enhance and stabilize the market.

The new token, “Alloy,” backed by Tether Gold (XAU₮), is designed to combine the stability of a stablecoin with the intrinsic value of physical gold.

It hoped that Tether’s Alloy will enhance stability in the volatile digital currency market.

The Alloy token represents a stake in physical gold stored in Switzerland, to provide a more stable unit of account while leveraging the long-term value retention characteristics of gold.

It was made in partnership with Moon Gold NA, S.A. de C.V., and Moon Gold El Salvador, S.A. de C.V., employing innovative stabilization strategies.

The features include over-collateralization with liquid assets and secondary market liquidity pools to ensure their value remains stable, and tracking the price of reference assets effectively.

The first token in the Alloy series, aUSD₮, is pegged to the U.S. dollar and over-collateralized by Tether Gold.

With this, users are able to leverage their gold holdings without needing to liquidate them, facilitating digital transactions, payments, and remittances.

Tether explained that aUSD₮ transactions are managed by Ethereum-compatible smart contracts, ensuring secure and efficient handling.

Paolo Ardoino, CEO of Tether, said, “While the stabilization mechanism is different compared to traditional options like USD₮, this innovative solution marks an exciting milestone, and we eagerly anticipate how it will interact with the rest of the market.”

This new initiative builds on Tether’s previous success with the XAU₮ stablecoin, introduced in early 2020.

XAU₮ allows investors to hold digital tokens representing one troy ounce of gold stored in a Swiss vault, bridging the gap between traditional gold investment and the digital economy.