Tether Gold (XAUt) is a stablecoin that is pegged to the price of gold. It is issued by Tether, the company behind the stablecoin USDT. It is an ERC-20 token operating on the Ethereum blockchain, launched for the first time in January 2020. Each unit of Tether Gold represents one troy fine ounce of gold and is supported by physical bars that adhere to the London Good Delivery (LGD) standard. ^[1]

Overview

When an investor or trader wishes to obtain XAUt tokens, Tether procures and assumes ownership of 1 troy ounce of physical gold per token. This gold is securely stored and held in custodial vaults on behalf of the customer. Subsequently, the corresponding number of tokens is issued to the purchaser. Tokens can also be acquired through secondary markets. ^[2]

Holders of XAUt tokens can exchange their tokens for physical gold, subject to payment of fees and meeting minimum redemption requirements. The gold is delivered to a location in Switzerland chosen by the holder. Alternatively, holders can request Tether Gold to arrange the sale of the gold and receive the proceeds instead of taking physical delivery in Switzerland. ^[2]

Each on-chain address holding XAUt tokens is associated with specific gold bars, and Tether Gold aims to provide a "Look-up Website" where anyone can find the gold bars linked to each on-chain address holding XAUt tokens. ^[3]

When an on-chain transaction transfers XAUt from one address to another, Tether Gold reallocates the physical gold associated with the XAUt held at each address. The goal is to minimize the number of physical gold bars associated with each address holding XAUt, ensuring that each XAUt token consistently represents ownership of a particular gold bar. ^[3]

To purchase or redeem XAUt with Tether Gold, users must undergo an identity verification process, agree to specific terms of service for XAUt, and fulfill applicable purchase or redemption minimums. ^[3]

Use Cases

As a stablecoin pegged to gold, some of the potential use cases of Tether Gold include:

Safe-Haven Asset

By endowing a digital token with the economic properties of physical gold, XAUt reduces the expenses related to holding the actual asset. Although the physical gold will primarily remain stored in vaults, XAUt facilitates the transfer of certain economic aspects of gold, such as ownership and value, across different locations worldwide. ^[3]

Liquid and Effective Portfolio Hedge

XAUT offers small denominations of physical gold at wholesale prices, which democratizes access to physical gold, enabling a wide range of investors to incorporate this asset into their portfolios. ^[3]

Sovereign-Neutral Monetary Unit

XAUt serves as a sovereign-neutral monetary unit by putting together the monetary principles of gold and bitcoin. By combining the scarcity and price stability of gold with bitcoin's non-partisan nature and resistance to censorship, XAUt offers a money-like asset that holds potential for widespread acceptance. ^[3]