Are There Any Cryptocurrencies Backed by Gold?
Cryptocurrency markets are awash with cryptocurrencies such as USDT and GUSD, which are backed 1:1 by US dollars.
09:25 07 April 2021
These stablecoins help even out the volatility seen with crypto coins and often act as a gateway to Bitcoin and altcoin investing. But they seldom are in a portfolio as a store of value.
What would be even better is to have a cryptocurrency that is backed by an asset that is not subject to inflationary pressures and political maneuverings, as the USD is. Something that can provide a store of value characteristics to create a new kind of stablecoin.
Gold makes the perfect hard asset to using in backing a cryptocurrency. With its low volatility and high liquidity, projects like Gold Coin, Meld Gold, and Tether Gold are providing this new type of crypto coin to investors wanting the best of both worlds. They get the convenience of using versatile, liquid stablecoins while at the same time investing in a commodity that has been used as a safe haven and store of value for thousands of years.
This article takes a look at five of today’s top digital gold cryptocurrencies to see how they work and what benefits they provide.
What is a digital gold currency (DGC)?
A digital gold currency is a form of electronic money that is backed by gold reserves (as the USD used to be). Generally, when you own a DGC each token is backed by a measure of gold, such as one gram, or it is pegged to the gold price. The physical gold is normally stored by a 3rd party facility, while the digital form can be used in several ways, including trading and investing.
5 Gold-Backed Cryptocurrencies to Watch
China-based ZenGold offers ZNG tokens, each of which equals 1 gram of 99.99% purity gold. Their token reserves are stored in the Shanghai Gold Exchange Vault. With ZenGold, users can easily trade their digital version of gold with transactions secured by a public blockchain.
Perth Mint Gold Token (PMGT)
The famous Perth Mint of Western Australia is the issuer of the PMGT gold-backed tokens. Token holders can verify the purity of the gold backing their investment using the Perth Mint’s GoldPass app, which keeps records of digital gold certificates that attest to the validity of the gold backing each user’s tokens. PMGT tokens are tradeable on KuCoin, and, unlike some gold-backed tokens, there are no fees for gold custody or storage since Perth is a mint itself.
Gold Coin (GLC)
Gold Coin introduced its “digital gold standard” as an ERC-20 token built on the Ethereum Blockchain. Their GLC tokens represent the first gold-backed coins that can be divisible as fractional shares, meaning they are divisible as an investment vehicle, whereas these digital gold “shares” can be easily bought, sold, and traded on cryptocurrency exchanges. Users can buy GLC using multiple national fiat currencies.
Based out of Singapore, DigixGlobal offers DGX tokens, each one pegged to 1 gram of gold.
To secure the gold backing their digital currency, DigixGlobal maintains vaults in Canada and Singapore, which are insured by the Bullion Association. DGX tokens allow investors and traders to easily diversify their assets by dividing, redeeming, and transferring gold bars through their digital representations.
Tether Gold (XAUT)
You may have heard of Tether (USDT) tokens before, as they are the most popular fiat-backed stablecoin in crypto markets. Now, the same company offers a gold-backed token, XAUT. Each token is valued at a single troy ounce of gold from one specific bar of gold from London Good Delivery. Tether maintains its gold reserves in Swiss vaults and makes the gold bar serial numbers available to corresponding token holders.
Gold-backed digital currencies offer the convenience of stablecoins with the added benefit of being backed by the world’s most precious hard asset. Digital gold and fast-growing crypto markets are a match made in heaven.