Tether Seeks Gold's Stability to Reinvent Crypto Finance

Tether, the largest stablecoin issuer globally, is actively pursuing investments in the gold mining and royalty sectors, signaling a broader strategy to diversify its crypto-derived earnings into traditional commodity assets. The company has engaged in discussions with various stakeholders across the gold supply chain, from mining and refining to trading and royalty firms, according to multiple industry sources. This strategic shift reflects Tether’s interest in leveraging gold as a stable and tangible asset, a move that aligns with CEO Paolo Ardoino’s long-standing advocacy for the metal as a "natural bitcoin." Ardoino has described gold as a safer and more reliable store of value compared to sovereign currencies and has positioned it as a complementary asset to cryptocurrencies.

In June, Tether made a significant move by acquiring a minority stake in Elemental Altus, a Toronto-listed gold royalty company, for $105 million through Tether Investments, the arm responsible for managing the company’s profits. The investment allows Tether to benefit from a share of future mine revenues in exchange for upfront capital. The company is reportedly considering expanding its stake in Elemental Altus and has engaged in further discussions with other gold royalty firms, though not all have resulted in concrete deals. One such instance was a failed attempt to secure an investment in Terranova Resources, a gold mining investment vehicle based in the British Virgin Islands.

Tether already holds a substantial position in bullion, with $8.7 billion worth of gold bars stored in a Zurich vault, which it uses as collateral for its stablecoin. The company also operates XAUt, a gold-backed stablecoin, although it has a significantly smaller market capitalization of $880 million compared to Tether’s primary USD-pegged stablecoin, USDT. Tether’s growing engagement with physical gold assets is part of a broader initiative to strengthen its balance sheet and provide alternative avenues for deploying its substantial profits. In the first half of this year, the company reported a profit of $5.7 billion, much of it derived from the interest earned on its vast holdings of U.S. Treasuries.

The gold mining sector has reacted with mixed responses to Tether’s interest, with some industry executives expressing skepticism about the company’s long-term strategy in the traditional commodity space. One mining executive described Tether as lacking a clear strategy despite its interest in gold, while another labeled it as the "weirdest company I have ever dealt with." Nevertheless, Tether’s financial capacity and willingness to make large upfront investments suggest it is taking its foray into gold seriously. The company’s approach appears to be more about securing long-term revenue streams through royalty deals rather than direct mining operations.

Analysts suggest that Tether’s gold investments could serve as a hedge against the volatility of the cryptocurrency market, where gold’s historical role as a safe-haven asset could provide stability to Tether’s portfolio. The company’s positioning of gold as a "natural bitcoin" underscores its ideological alignment with decentralized principles, emphasizing similarities in scarcity, perceived value, and global accessibility between the two assets. If successful, Tether’s strategy could set a precedent for other stablecoin issuers to explore diversification into traditional commodities, potentially reshaping the risk profiles of digital asset firms in the process.

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[1] Stablecoin group Tether holds talks to invest in gold miners (https://www.ft.com/content/135fb3dd-2395-4f04-8cc6-7fb0e87cd092)

[2] Tether in talks to invest in gold miners as its gold reserves ... (https://cryptobriefing.com/tether-gold-investments-mining/)

[3] Stablecoin Giant Tether Invests in Gold Mining Firms (https://beincrypto.com/tether-targets-gold-miners-as-profits-climb/)