A Quick Look At Gold Stablecoins and Other Transactable Gold

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Published : June 28th, 2022
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Back in 2019, gold stablecoins existed, but they were barely viable with sub-$10 million market caps. Even the biggest USD stablecoin, Tether, was still only around $2 billion. But now, Tether is around $70 billion, and the gold stablecoins are getting up over $100 million. According to CoinMarketCap.com, there are two leading gold stablecoins at present:

Paxgold (PAXG): $610m market cap. https://www.paxos.com/paxgold/

Tether Gold (XAUT): $451m market cap. https://gold.tether.to

The reported market caps on these look pretty weird, though. Not the curve of organic expansion that we saw for USD Tether. But, maybe it is a plan to attain scale quickly. After the huge success of Tether and other USD stablecoins, these are no longer kitchen table operations. Larger-scale venture money is involved.

This kind of crypto token can serve a purpose. However, a more centralized platform can also work well, and may be more viable for basic transactions. GoldMoney was the first example of this, although it never really realized its potential as a transactional device. Kinesis has set up an interesting platform for precious metals. Also, Coro has set up a gold-based platform that specifically targets transactional usefulness, with very low transaction costs and regulatory/banking system integration. It is not the kind of “pirate currency” that the crypto world promises, but probably more useful for 99% of daily business.

I’ll also give notice to LD2 or “Liberty Dollar II,” a silver-based crypto stablecoin founded by Extra von NotHaus, son of Bernard von NotHaus. Bernard von NotHaus issued the Liberty Dollar, gold-backed private banknotes, starting in 1998, a breakthrough attempt to establish a private-sector currency alternative to the floating fiat USD.

Liberty Dollar privately-issued banknotes

Banknotes actually have a lot of difficulties with them. It seems that crypto approaches, or other digital app-based platforms, have a lot of advantages to any banknote system. If you really wanted in-person anonymous real-world transactions, as banknotes offer, today you can just trade gold coins, with various digital alternatives better for small-scale transactions.

Any major bank today could set up “gold checking accounts” without much difficulty. At first, this could be a self-contained platform, similar to GoldMoney, where everyone would need accounts with the same bank. With a little more effort, interbank clearing could be established. They already have all the infrastructure today.

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Nathan Lewis was formerly the chief international economist of a firm that provided investment research for institutions. He now works for an asset management company based in New York. Lewis has written for the Financial Times, Asian Wall Street Journal, Japan Times, Pravda, and other publications. He has appeared on financial television in the United States, Japan, and the Middle East.
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