Overview of Tether Gold (XAUt)
Tether Gold (XAUt) is a digital asset introduced by Tether Operations Limited in January 2020. XAUt tokens are pegged to physical gold, with each token representing one troy fine ounce of London Good Delivery gold stored in a secure vault in Switzerland. This gold-backed stablecoin was developed to meet growing demand for a digital asset that combines gold’s stability with the ease of blockchain-based transactions.
Purpose and Functionality
Concept and Structure
Tether Gold is designed to provide users with a highly mobile “safe-haven” asset that mirrors the value of physical gold. The asset seeks to blend the traditional safety of gold investments with the liquidity and accessibility characteristic of digital assets. This structure allows XAUt holders to either redeem their tokens for physical gold or trade the tokens in the digital marketplace, offering an alternative to conventional gold markets.
Asset Management and Custody
The gold backing XAUt tokens is held by a custodian in Swiss vaults and is insured, although Tether disclaims full coverage. Each XAUt token is directly associated with specific gold bars, traceable through Tether’s online system, where holders can identify the exact gold bar allocated to their token’s on-chain address.
Token Specifications and Fees
Issuance and Redemption
Tether Gold is available on the Ethereum (ERC-20) and Tron (TRC-20) blockchains, allowing users to interact with the asset across two major networks. Verified users can purchase a minimum of 50 XAUt directly from Tether Gold. Redemption options include physical delivery within Switzerland or potential sale of the gold in the Swiss market. Redemption is limited by minimum requirements, such as holding a minimum of 430 XAUt for physical delivery due to gold bar size.
Fees
Users incur fees primarily for issuance and redemption, such as a 25-basis point (bp) issuance fee. Gas fees are not charged for transactions, which distinguishes Tether Gold from other digital gold-backed assets.
Key Use Cases
Mobile “Safe-Haven” Asset
XAUt tokens enable global, highly mobile ownership of gold, eliminating the logistical challenges of physical storage. This digital gold asset can be used for quick value transfers across jurisdictions without the physical limitations of traditional gold.
Portfolio Hedge and Liquidity
Tether Gold offers a cost-effective method for investors to hedge against economic instability by adding gold exposure. Unlike typical gold products, XAUt facilitates fractional ownership, allowing smaller investors to hold gold as a hedge with comparatively lower entry and storage costs.
Sovereign-Neutral Monetary Unit
Tether Gold’s decentralized ownership structure positions XAUt as a sovereign-neutral unit, detached from any central monetary authority. This quality aligns with the increasing interest in assets that provide a hedge against fiat currency volatility and serve as an alternative base for trade, mirroring the functions of a “digital gold standard.”
Compliance and Considerations
Tether Gold adheres to regulatory limitations and prohibits sales to restricted persons, including U.S. citizens and residents of certain sanctioned regions. Additionally, prospective purchasers are expected to be knowledgeable about digital assets and blockchain technology due to the speculative nature of the tokens.
