Is Crypto Taking Us Back to a Gold Standard?
In 1971, the U.S. terminated the convertibility of the dollar to gold. But the crypto industry may revive the gold standard.
Tether Gold (XAUT), first launched in 2020, is a stablecoin that purportedly “provides ownership on a 1:1 basis of one fine troy ounce of gold on a physical bar of gold that meets the Good Delivery standard of the London Bullion Market Association (LBMA).”
On June 17, 2024, Tether announced the creation of “Alloy by Tether: A New Digital Asset Backed by Tether Gold.”
Owners of XAUT can use that asset as collateral to then create aUSDT (Alloy tokens). According to Tether, the process involves a few straightforward steps: (1) purchase XAUT; (2) secure it through a smart contract; and (3) mint aUSDT up to an amount capped at a percentage of the value of the secured XAUT.
Tether further explains that the aUSDT will always be overcollateralized by the deposited XAUT, with the aim of safeguarding against large price fluctuations. To withdraw the deposited XAUT, users will need to return all minted aUSDT.
It remains to be seen whether this new ecosystem will thrive and whether gold and crypto assets can interact on a sustainable basis in the global economy. For now, the advent of aUSDT is a sign of continuing innovation within the larger crypto community, even if aUSDT and/or XAUT have dubious statuses under U.S. law.
For its part, Tether disclaims that it is offering to sell or soliciting an offer to buy aUSDT or XAUT:
This press release is not an offer to sell or the solicitation of an offer to buy Alloy by Tether tokens like aUSDT or XAUT. Customers may only mint or return Alloy by Tether tokens pursuant to Moon Gold NA, S.A. de C.V.’s and Moon Gold El Salvador, S.A. de C.V.’s Alloy by Tether terms of use available (as of the date of this press release) at https://alloy.tether.to/en/legal-terms. TG Commodities Limited will only sell or redeem XAUT pursuant to its gold token terms of sale and service available (as of the date of this press release) at gold.tether.to/legal.
In an era of regulation by enforcement—with judges disagreeing on the fundamental characteristics of a “security”—consumers, investors, purchasers, sellers, and minters of aUSDT or XAUT cannot fully assess their legal obligations, liabilities, rights, or benefits under U.S. law. XAUT, aUSDT, and related crypto assets could be subject to the Securities Act of 1933, the Securities Exchange Act of 1934, the Electronic Fund Transfer Act (EFTA), and/or state consumer protection statutes. Consequently, all stakeholders should be mindful of the shifting legal landscape on which gold and crypto now interact.