Key Insights:
As recession fear lurks in the corner, investors have scrambled to buy gold.
Rather than buying gold from centralized institutions via ETF, digital gold, gold bonds, and other ways, investors now have the option for Gold-backed stablecoins.
Tether issues XAUt, a gold-standard stablecoin whose price is pegged to real gold.
Other issuers are Paxos Gold (PAXG) and Perth Mint Gold Token (PMGT).
Gold-backed stablecoins are cryptocurrencies that are pegged to the value of gold. They are typically denominated as 1 gm, 10 gm, 1 ounce, or 1 kilogram. These stablecoins primarily exist on the Ethereum blockchain but can be tokenized using any chain for that need.
The need for gold-backed stablecoins arose due to the lack of any decentralized form of gold. Further, these tokens can be traded instantly, kept indefinitely, and can be exchanged at all time, therefore fulfilling all the properties of money.
At present, there are several Gold-backed stablecoins, but out of them Tether's XAUt stands with the highest market cap of $718 million. The second largest is Paxos Gold (PAXG) with a market cap of $614 million.
The Perth Mint Gold Token (PMGT) is also a key player in this space but its control is centralized and hence, we would avoid it for the current article.
Yes, gold-backed stablecoins are real-world assets that are tokenized on the blockchain and therefore can be called RWAs.
Gold Stablecoins have several advantages over traditional gold, bond gold, ETFs, and even digital gold. However, they do have some cons that impact them.
Gold Stablecoins are better than all forms of traditional gold (whether physical or digital) in terms of technology, purity, centralization risks, and transportation.
Pros
It helps in efficient trading. Cross-border transactions happen in seconds.
Charges for transfer of ownership are much less, just the gas fee.
Honors user privacy at the maximum level.
Transparent way of owning and trading gold.
Zero risk of impurities.
Very low risk of default as compared to gold bonds.
No risk of centralized entities freezing your assets.
Most of the cons associated with the gold stablecoins are due to regulatory troubles. As crypto regulations become more clear, we expect these issues to vanish in the future.
Cons:
Gold stablecoins are not in wide circulation, with both XAUt and PAXG being less than $1 billion in market cap.
Largely unregulated across the world, which does not allow corporate funds to flow in.
Most large exchanges across the world have either listed XAUt or PAXG.
Since XAUt and PAXG are on Ethereum, you can visit any Ethereum DEX like Uniswap, Pancakeswap, Sushiswap, etc., and swap them with other ERC-20 coins. Make sure you have some ETH to pay gas fee.
Though it is unlikely that any P2P exchange will have XAUt or PAXG listed, you would be able to buy them in the future as more assets choose the blockchain route towards digitization.
Wallets like Metamask allow you to buy crypto directly from the portfolio page. All you need is some ERC-20 token and some ETH. In the future, as the Pectra Upgrade seeks to implement account abstraction, you would be able to swap between any two ERC-20 tokens.
If you are buying in bulk for selling in the retail markets, you could get XAUt minted at the Tether treasury.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.