In a recent interview with Bloomberg, Paolo Ardoino, CEO of Tether, revealed details about the new backing strategy for the aUSDT product, opting for gold instead of Bitcoin due to the stability of the precious metal.

Gold as a Stable Backup

Ardoino explained that although Bitcoin could have been an option to support USDT, the crypto asset's tendency to experience significant price fluctuations made gold the preferred option. “Until 1971, the US dollar was backed by gold and we frequently hear from our customers of interest in having the optionality… [So] we also see the opportunity to provide an [option] for others who want to see a more transparent backing of a dollar synthetic and gold is probably the best asset to make it happen because it is much less volatile than Bitcoin. “We could have done Bitcoin but gold is probably a better choice in the short term.”

Launch of aUSDT and Tether's Alloy Series

Earlier this year, Tether announced the launch of aUSDT, described as a digital asset overcollateralized by Tether Gold (XAUT), a gold-pegged stablecoin. Each XAUT coin represents exposure to physical gold secured in vaults in Switzerland. According to Tether, aUSDT is the first product in its new line of Alloy products, which the firm claims are “designed to track the price of reference assets through stabilization strategies such as overcollateralization with liquid assets and liquidity pools of the secondary market.

Overcollateralization: Protection for Investors

Overcollateralization, a prominent strategy in Alloy products, implies that the assets used to back a financial product are worth more than the value of the product itself, protecting investors against potential losses. This tactic is an additional guarantee that seeks to offer greater security and confidence to investors when investing in products such as aUSDT, which seeks to combine the stability of gold with the innovation of blockchain technology.

This approach by Tether not only underlines the search for stable and secure alternatives for cryptocurrency investors but also reflects an adaptation to the needs and concerns of users who prefer less volatile and more traditional assets such as gold.