Tether Launches Alloy to Combine Digital Currency with the Stability of Gold

Tether, a prominent stablecoin issuer in the crypto industry, has announced the official launch of Alloy by Tether, a tethered asset backed by Tether Gold (XAUT).

This new token aims to provide stability in the digital economy. It combines the strengths of a stable unit of account with the security and reliability of gold.

Tether CEO Discusses the Future of Tethered Assets with Alloy

Alloy by Tether introduces a novel category of digital assets known as tethered assets. These assets track the price of reference assets through stabilization strategies like over-collateralization with liquid assets and secondary market liquidity pools. This approach provides consistent value and stability, advancing the real-world asset (RWA) tokenization sector.

Read more: Real World Asset (RWA) Backed Tokens Explained

Paolo Ardoino, CEO of Tether, expressed his enthusiasm for the new venture. He highlighted that while the stabilization mechanism differs from traditional options like USDT, this solution marks an exciting milestone.

“Alloy by Tether is an open platform that allows the creation of collateralized synthetic digital assets and will soon be part of the new Tether digital assets tokenization platform, launching later this year,” he added.

Alloy by Tether also enables the creation of different tethered assets with broader backing mechanics, potentially including yield-bearing products. This technology provides institutions with a modern approach to asset management. It offers a secure, gold-backed digital asset that can be integrated into portfolios.

Moon Gold NA, S.A. de C.V., and Moon Gold El Salvador, S.A. de C.V. will handle the issuance and management of Alloy by Tether. They will cater to different customer segments and regulatory requirements.

RWA Tokenization Gains Momentum with Commodity-Backed Tokens

The first token in the Alloy by Tether lineup is aUSDT. This digital currency has a design to track the value of one US dollar.

aUSDT distinguishes itself by its over-collateralization by XAUT, supported by physical gold stored in Switzerland. This combination offers users the stability of the US dollar backed by the value of gold.

Users can create aUSDT tokens using XAUT as collateral. This setup allows users to engage in digital transactions, payments, and remittances with a currency that feels as familiar as the US dollar without selling their XAUT.

Currently, Alloy by Tether smart contracts operate on the Ethereum Mainnet. Users mint aUSDT by depositing XAUT through Ethereum-compatible smart contracts. The aUSDT smart contract tracks all collateral and minted tokens, using price oracles to constantly evaluate the mint-to-value (MTV) ratio.

This new development aligns with the growing trend of real-world asset tokenization. According to CoinGecko’s RWA Report 2024, commodity-backed tokens have hit $1.1 billion in market capitalization, with gold remaining the most popular commodity.

Tokenized precious metals such as XAUT and PAX Gold (PAXG) make up 83% of the market cap of commodity-backed tokens. These tokens are backed by physical gold, offering a reliable store of value.

Read more: What Are Tokenized Real-World Assets (RWA)?

Commodity-Backed Tokens by Market Cap. Source: CoinGecko

While commodity-backed tokens currently represent only 0.8% of the market cap of fiat-backed stablecoins, the potential for growth in this sector is significant. With the introduction of Alloy and aUSDT, Tether is positioning itself to take advantage of the expansion of the real-world asset tokenization market.

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