The CEO of Tether says that the stablecoin issuer’s synthetic aUSDT product is backed by gold rather than Bitcoin (BTC) because the precious metal is more stable in price than the crypto king.
In a new interview with Bloomberg, Paolo Ardoino says the firm could have chosen Bitcoin to back aUSDT but BTC’s tendency to go through wild price swings made gold a more preferable option.
“Until 1971, the US dollar was backed by gold and we often hear interest from our customers to have optionality…
[So] we also see the opportunity to provide an [option] for others that want to see a more transparent backing of a synthetic dollar and gold is probably the best asset to make that happen because it’s much less volatile than Bitcoin. We could have done Bitcoin but gold is probably a better choice for the short term.”
Earlier this year, Tether announced that it would be launching aUSDT, which is described as a digital asset over-collateralized by Tether Gold (XAUT), a gold-pegged stablecoin. Each XAUT coin represents exposure to physical gold secured in vaults in Switzerland.
According to Tether, aUSDT is the first product in its new line of Alloy products, which the firm says are “designed to track the price of reference assets through stabilization strategies like over-collateralization with liquid assets and secondary market liquidity pools.”
Over-collateralization occurs when the assets used to back a financial product are worth more than the value of the product itself, protecting investors against potential losses.
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Featured Image: Shutterstock/k_yu/Natalia Siiatovskaia
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