The Blubber

The world's largest stablecoin, Tether, has created a new synthetic dollar backed by gold.

The token was created on the company’s new Alloy by Tether platform and will trade as aUSDT via smart contracts on the Ethereum Mainnet blockchain. Users can mint it through over-collateralization by depositing another Tether token that tracks the value of gold.

This new offering highlights Tether’s ambitions to expand beyond its USDT stablecoin, a token with a market capitalization of $112.5 billion that tracks the value of the US dollar and is backed by reserves of US Treasury bills, other securities, and investments.

Alloy by Tether was developed by Moon Gold NA S.A. de C.V. and Moon Gold El Salvador S.A. de C.V., both members of the Tether Group. Alloy by Tether was designed to be an open platform allowing for the creation of other tethered assets, potentially including yield-bearing products, according to the company.

“Alloy by Tether introduces a novel category of digital assets known as tethered assets, designed to track the price of reference assets through stabilization strategies like over-collateralization with liquid assets and secondary market liquidity pools,” the company stated in a press release.

Tether Gold has a market capitalization of about $573 million and is backed by physical gold stored in Switzerland, according to the company.

The new aUSDT currency is aimed at users looking to make transactions, payments, and remittances with a currency similar to the US dollar without having to sell their gold-backed digital assets, according to Tether’s press release.

Tether has been earning significant revenue with its USDT stablecoin amid the current high interest-rate environment. In the first quarter, Tether reported a profit of $4.5 billion, according to its published attestation.

The quality of assets backing stablecoins like USDT has come under intense scrutiny in recent years. Regulators have grown concerned about the liquidity of the reserves backing them and whether they could withstand mass redemption requests under market pressure. In 2021, Tether, incorporated in the British Virgin Islands, reached a settlement with the New York Attorney General — without admitting any wrongdoing — over allegations that it lied about its reserves and hid losses. It reached a similar settlement with the Commodity Futures Trading Commission that same year, without admitting or denying the CFTC’s allegations.

Despite these issues, the value of Tether’s USDT has been able to track the dollar one-for-one without any major depegs in recent years.