Earlier this year, TG Commodities Limited offered new digital asset Tether Gold (XAUT). Reportedly, this is the only gold-backed digital asset that guarantees direct control over the physical gold storage.
According to the official announcement, the gold bars backing the asset have been secured in a Swiss vault with world-class security and anti-threat measures. The XAUT tokens holders would be able to enjoy gold ownership without paying exorbitant storage fees and suffering limited accessibility.
We were delighted to have a chat with Tether CTO, Paolo Ardoino. In this interview, we got an exclusive insight into the value of XAUT and why it will interest the investors. To remind readers, Paolo is also the CTO of Bitfinex.
Q1. Please educate our community on what are the core advantages of purchasing Tether Gold. And from which exchanges can they buy XAUT?
Paolo: Tether Gold is a product that tracks the price of gold. Particularly in turbulent times, many people like holding gold. However, holding gold can be very expensive — for example, holding gold through ETFs, mutual funds or physically with custodians can expose you to significant annual fees. XAUT does not charge an annual fee. Also, Tether Gold combines the transactional capabilities of digital tokens with the value stability of gold. These are significant advantages over more “traditional” methods of holding gold. We believe that as XAUT continues to build on its position as the premier gold-backed stable coin, many exchanges will support it. Right now it’s available on Bitfinex, RenrenBit, and FTX.
Q2. The official TetherGold handle tweeted a picture featuring some of the 400-ounce gold bars owned by the holders of Tether Gold tokens. But the transparency page suggests tokens worth 368kg gold have been issued. What explains this gap?
"The rougher the seas, the smoother we sail. Ahoy!"
Enjoy a picture featuring part of the 40 gold bars under Tether Gold control!
(We've removed the logo of our supplier for confidentiality reasons.) pic.twitter.com/jp5nXBjbLy
— tethergold (@tethergold) February 20, 2020
Paolo: The photo was only a part of the bars that are held by our custodian. Right now we have 40 bars in custody, but we’re constantly adding more. For security reasons, we couldn’t take a photo of all 40 bars. The security of the gold held by our custodian is a top priority for us. Just 10 bars were shown for the purpose of illustrating what they look like, and showing the Tether Gold t-shirt, and to start demonstrating to the community that this thing is real, and it is growing.
Q3. Do you think Tether Gold will receive support from Gold Bullion Peter Schiff?
Paolo: I don’t know, and I don’t expect it. However, he’s more than welcome to try out our product!
Q4. As Bitfinex has added margin trading for Tether Gold. How do you think this will benefit the traders?
Paolo: As with any token, it is important that users cannot only buy and sell it, but they should be able to short these, to bet against it, because that creates a more healthy market. This allows for proper hedging. You can also think of an interesting strategy where you are long gold on a traditional exchange, the CME for example, and you can short gold on Bitfinex and you’re basically doing arbitrage between a crypto platform with Tether Gold and a traditional platform with an ETF on gold. Shorting opens many possibilities.
Q5. Do we see Tether Gold as a store of value or value of exchange in the near future?
Paolo: I believe that it is both. Gold is probably one of the most renowned value stores, and XAUT is a proxy for gold. The volatility of gold is quite limited, so we are seeing users interested in buying one or two gold bars but with Tether Gold, as tokens. Holders of Tether Gold can go to Switzerland to collect their gold bars, so long as they meet the minimum redemption requirements — essentially they need to redeem in full gold bar increments.
Owning gold through Tether Gold is a lower-cost option for acquiring moving assets into gold. We also see that as a possible medium of exchange because the volatility is quite low it can be used, and since each Tether Gold token can be fractionalized up to six decimals, it can easily be broken up and used to buy goods. Because of gold’s stability, for some users, it may be preferable as a medium of exchange to more volatile digital tokens.
Q6. There are other companies that have attempted tokenized Gold, including DigiX. What is the advantage of Tether Gold?
Paolo: The advantage of Tether Gold is that we decided to take the difficult path. We did not use synthetic solutions to create Tether Gold like using futures with these products. Also, we didn’t use the gold storage from a big bank, like Paxos. Furthermore, we decided to go with an independent custodian in Switzerland that could keep the gold safe and arrange for appropriate insurance.
We know that we can always check into the gold and have full supervised access. We always know how the gold is managed, with video surveillance, who is visiting the gold and so on. That is a key factor and a game-changer. In Bitcoin we say, not your keys, not your Bitcoin — here it’s the same for Tether. Not your vault, not your gold. That’s why we decided to be different from the competition, to find a company that could serve our needs and offer, we think, a better product.
Q7. Is Tether Gold a security? As it is backed by a real-world asset?
Paolo: I’m not a lawyer, but I know we had lawyers in a number of jurisdictions look at that question. Based on that work, we feel confident that Tether Gold is not a security.
With the markets in turmoil right now, Delta Exchange has announced the launch of Tether Gold Perpetual contracts. And it seems now the investors can make the most of the market volatility.
Let us know your thoughts in the comments below.