Tether Unveils Alloy, A Synthetic Dollar Backed By Gold

Tether, the company behind the USDT stablecoin, has unveiled a new synthetic dollar, Alloy, backed by gold.

Tether stated that the project would be the first “tethered asset,” an innovative asset category designed to track a reference asset’s price through different facets. 

A New Synthetic Dollar

According to a press release issued by Tether, the synthetic dollar was developed by Moon Gold NA, S.A. de C.V., and Moon Gold El Salvador, S.A. de C.V. Both entities behind Alloy’s creation are also key members of the company’s Tether Group. The new token will be trading as aUSDT through smart contracts on the Ethereum mainnet. aUSDT will be overcollateralized by Tether Gold and supported by physical gold reserves held in secure storage in Switzerland. 

“Tether, the largest company in the cryptocurrency industry, is excited to announce the official launch of Alloy by Tether, a ground-breaking tethered asset backed by Tether Gold. Developed by Moon Gold NA, S.A. de C.V. and Moon Gold El Salvador, S.A. de C.V., both of whom are members of the Tether Group, Alloy by Tether aims to redefine stability in the digital economy by combining the strengths of a stable unit of account with the security and reliability of gold.”

Tether’s new offering highlights the company’s plan to expand beyond USDT, the largest stablecoin in the market with a market cap of $112 billion. USDT tracks the value of the U.S. Dollar and is backed by U.S. Treasury Bills, securities, and other investments. Alloy will also enable the creation of other tethered assets, potentially including yield-bearing products. 

“Alloy by Tether introduces a novel category of digital assets known as tethered assets, designed to track the price of reference assets through stabilization strategies like over-collateralization with liquid assets and secondary market liquidity pools.”

Target Audience

According to Tether’s press release, aUSDT is aimed at those users who want to make payments, remittances, and transactions using a currency similar to the U.S. Dollar without selling their gold-backed digital assets. Speaking about the launch of Alloy, Paolo Ardoino, the CEO of Tether, stated, 

“We are thrilled to announce the launch of Alloy by Tether, introducing a class of digital assets backed by gold and tethered to a reference fiat currency. While the stabilization mechanism is different compared to traditional options like USD₮, this innovative solution marks an exciting milestone, and we eagerly anticipate how it will interact with the rest of the market. Moreover, we plan to make this innovative technology available in our upcoming digital asset tokenization platform as well.”

Reserves Under Scrutiny

Tether has made a significant profit via its USDT stablecoin, recording a profit of $4.5 billion. However, the quality of assets backing USDT and other stablecoins has come under scrutiny in recent years, with regulators concerned about the liquidity of the reserves and whether they could handle mass redemption requests during times of market duress or pressure. 

In 2021, Tether reached a settlement with the New York Attorney General, without admitting any wrongdoing, that it lied about its reserves and hid its losses. It reached a similar settlement with the Commodity Futures Trading Commission (CFTC) without admitting to or denying the CFTC’s allegations. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.