Tether’s ‘Genius Idea:’ Launching aUSDT, a Gold-Backed Stablecoin with Higher Profit Potential

On June 17, Tether CEO Paolo Ardoino announced aUSDT, a new synthetic dollar over-collateralized by XAUt, Tether’s gold-backed digital asset.

In a post on X on June 18, industry analyst and stock-to-flow creator Willy Woo said it was “A genius business idea by Tether.”

Tether’s USDT is currently earning on U.S. Treasury Bills, but now the firm can issue a stablecoin that earns on gold gains, he explained.

This has greater potential for profits as, over the long term, gold gets 8% compared to T-Bills at 0% to 5%.

A stable coin over collateralised with gold.

A genius business idea by Tether.

Instead of issuing USDT and earning the T-Bills yield, the company can issue aUSDT earning the gain on gold.

Over the long term Gold gets 8%, compared to T-Bills at 0-5%. https://t.co/ZBCjnK05Ja

— Willy Woo (@woonomic) June 18, 2024

Over-Collateralized by Gold

Woo went on to say that he wouldn’t be surprised if Tether issued a bUSDT stablecoin backed by Bitcoin, given that the firm is building a sizeable BTC treasury. However, it “doesn’t make sense right now given the bear market drawdowns,” he said before adding, “but in a future cycle where BTC is bigger and less volatile, it could happen.”

He compared the asset to Terraform Labs’ Terra and Luna, which was a stablecoin backed by a volatile asset.

“As with every new product the adoption will take time, Tether has plenty of time to stack more gold. Terra/Luna never had $5.5 billion of real income per year like Tether.”

As part of the announcement, Ardoino also introduced Alloy by Tether, an open platform that allows users to create collateralized synthetic digital assets. He added that it will soon be part of the new Tether digital asset tokenization platform, which will launch later this year as the company ventures deeper into real-world asset (RWA) tokenization.

Tethered assets are crypto assets that aim to track the reference price of another one through different stabilization mechanisms, in this case, the firm’s gold-backed XAUt token.

Furthermore, aUSDT price stability is maintained through supply and demand dynamics on secondary markets, including liquidity pools.

Stablecoin Outlook

Tether Gold, or XAUt, which tracks the price of the commodity, currently has a market capitalization of $572 million. It was trading at $2,318 at the time of writing. Gold prices hit an all-time high of $2,426 per ounce on May 20 but have retreated slightly since.

Tether is the market leader for dollar-pegged stablecoins, with a record-high circulation of $112.5 billion USDT and an overall market share of around 70%. Its nearest competitor is Circle’s USDC, which has a circulation of $32.6 billion and a market share of 20%.

The total stablecoin market cap is $162 billion, representing around 6.5% of the total crypto market.