On Monday, Tether introduced Alloy, a novel stablecoin pegged to the US dollar and backed by physical gold. This inaugural foray into tethered assets represents a significant milestone for the issuer.
According to Tether, tethered assets are specifically engineered to mirror the value of a designated reference asset, such as the US dollar. This is achieved through robust stabilization mechanisms like over-collateralization, where the collateral backing exceeds the value of the tokens issued, alongside ensuring secondary market liquidity.
Alloy, denoted as aUSDT, will be underpinned by Tether Gold (XAUt), which represents ownership of physical gold. This backing ensures Alloy maintains parity with the US dollar, establishing it as a “synthetic” dollar without direct dollar-for-dollar support.
In a strategic move, Tether leveraged regulatory expertise from El Salvador for the issuance of aUSDT. Alloy, tailored to appeal to cryptocurrency users engaged in transactions and remittances, offers the advantage of retaining exposure to gold-backed tokens without necessitating liquidation. Interested parties can mint aUSDT by depositing Tether Gold as collateral, secured in Swiss vaults and boasting a market capitalization of $570 million.
To oversee the stablecoin’s issuance, Moon Gold NA and Moon Gold El Salvador will operate under the auspices of El Salvador’s National Commission of Digital Assets (CNAD).
This development follows a contentious period in May when Tether’s CEO Paolo Ardoino defended against apprehensions voiced by Ripple’s CEO concerning potential regulatory scrutiny. Interestingly, Ripple subsequently hinted at its own stablecoin launch in June, intensifying competition in the stablecoin arena.
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