Tether has become the world's largest independent gold holder, aiming to create a "gold standard" encryption currency system.

Gold prices have repeatedly hit new highs this year, with many attributing it to currency depreciation and investment hedging. However, the Financial Times (FT) believes that the real driving force may be Tether. This largest stablecoin issuer in the world is massively buying physical gold, becoming the largest gold holder outside of central banks. Analysts suggest that Tether's aggressive buying may be aimed at betting on “gold tokenization” becoming the next cryptocurrency narrative.

Tether massively buys 116 tons of gold, becoming the largest gold holder outside of the Central Bank.

A recent study by the American investment bank Jefferies indicates that Tether holds 116 tons of physical gold in its reserves as of the end of September 2024, comparable in scale to the Central Banks of South Korea, Hungary, Greece, among others, making it the largest holder of gold outside the global Central Bank system.

When gold prices surged, many commentators discussed currency depreciation and the weakness of the dollar, but FT pointed out that Tether's aggressive buying might also be an important reason for driving up prices.

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Tether's scale can shake the gold market: single quarter buying accounts for 2% of global demand.

Compared to the holdings, Tether's speed of buying gold is even more astonishing.

Jefferies estimates that Tether's gold purchases in the last quarter exceeded those of all Central Banks combined, amounting to about 2% of global gold demand, equivalent to 12% of global Central Bank purchases.

The gold purchases of Tether in the last quarter clearly surpassed those of global Central Banks.

Analysis indicates that Tether's aggressive buying over the past two months has led to a short-term tightening of market supply, which has also created a speculative sentiment towards rising gold prices a few months ago.

Investors reveal that Tether plans to buy another 100 tons of gold in 2025, which is almost effortless with its expected profit of 15 billion dollars this year.

Why does Tether want to buy gold? The narrative of “gold tokenization” emerges.

Interestingly, Tether's crazy hoarding of gold seems to have nothing to do with its product layout. The U.S. Genius Act prohibits stablecoin issuers from using gold as a reserve asset, which means Tether's gold cannot support its upcoming new compliant stablecoin USAT.

Jefferies speculates that Tether wants to take the lead in the “gold tokenization” market.

Analysts believe that the drawbacks of traditional gold investment include the need for physical gold custody, management fees for ETFs, rollover costs for futures, inability to trade 24/7, slow settlement speed, and high investment thresholds. In contrast, tokenization of gold offers the ability to trade around the clock, instant settlement, zero management fees, and lower entry barriers.

Currently, only two companies in the world can surpass a scale of 1 billion USD, and Tether is one of them. Its gold token XAU₮ has doubled in growth over the past six months, and since August, it has purchased over 275,000 ounces of gold ( worth approximately 1.1 billion USD ) for the XAU₮ reserves.

(Tether Gold surpasses PAXG with gold reserves, with a market capitalization of over 2.2 billion USD)

Tether's goal: to create a “gold-backed cryptocurrency system”

FT believes that Tether CEO Paolo Ardoino, as a “dollar pessimist,” may have ambitions that go beyond merely issuing stablecoins, but rather to create a cryptocurrency value exchange system based on “tokenization of gold” instead of “fiat stablecoins.”

In this regard, FT also cannot help but sarcastically remark: “Convincing risk-averse investors to hand over value to a private company registered in El Salvador, holding hundreds of tons of unverified gold, stored in unknown warehouses in Switzerland, is probably not that easy.”

Of course, this move undoubtedly sparked discussions in the crypto community regarding “Ardoino's preference for gold over Bitcoin.” Former Swan analyst Sam Callahan stated: “Tether has allocated up to 15% of its net operating profits to purchase more Bitcoin since 2023, currently holding about 87,000 coins.”

The real point is that Tether is no longer just a stablecoin issuer, but a global corporate group.

(Tether discusses investing in gold mining companies: using “digital gold” to buy “physical gold”?)

This article Tether becomes the world's largest independent gold holder, aiming to create a “gold-backed” cryptocurrency system first appeared in Chain News ABMedia.