The stablecoin giant Tether announced a service that lets users deposit a surplus of its existing gold-backed token, XAUT, in order to "mint" a new type of $1 stablecoin called a USDT. Got that? If not, you can watch a 40-second video the company posted on X that shows an A-for-Alloy symbol spinning around a bar of gold, a marble figure on a laptop, and an oily voice whose closing pitch is, "Let's redefine the concept of stability together."
I guess "redefining stability together" is one way to put it. Another is to say "come along as Tether adds new layers of synthetic assets to its black box of an operation and hope for the best." I don't know about you, but this makes me nervous.
If you're unfamiliar, the market cap for Tether's flagship USDT stablecoin—$112 billion at last count—is bigger than most banks and the GDP of most countries, yet the company has yet to conduct a proper audit. Instead, the crypto world has long taken it on faith that all those stablecoins are properly backed by safe assets. And to be fair, this has worked so far. Even as crypto has undergone umpteen crises, including the FTX meltdown that wiped out half the industry, Tether has held its peg.
This new gold stablecoin thing feels next-level, though, even for Tether. What the company is trying to do is have customers treat its Alloy platform, which sits on Ethereum, as "an open platform that allows the creation of different Tethered Assets with broader backing mechanics, potentially including yield-bearing products." So stablecoins backed by Tether-tokenized gold is likely only the beginning.
In an interesting X thread, crypto academic Adam Cochran posits that Tether is trying to expand into other assets and into DeFi at a time when Coinbase is using Base to funnel users towards its USDC stablecoin, and banks and fintech firms are muscling in on the stablecoin market too. In other words, Tether wants to diversify in case its USDT golden goose is threatened.
In this sense, the Alloy gamble makes good business sense for Tether and its ambitious CEO. And I should point out, Tether is requiring those who want to create a gold-backed stablecoin to post extra collateral—a practice that has successfully worked for a decade in the case of the pioneering decentralized stablecoin DAI. At the same time, the idea of Tether spinning up a whole series of new crypto assets beyond USDT, and having those assets serve as collateral for other Tether assets, feels like it could be trouble. Am I overreacting? Let me know what you think.
Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts
