Tether Looks To Compete Against DeFi With Upcoming Synthetic Asset Platform 

Tether launched a gold-backed USD stablecoin demonstrating its forthcoming “Tethered asset” platform, Alloy.

By: Mehab Qureshi Loading...

Tether Looks To Compete Against DeFi With Upcoming Synthetic Asset Platform 

Tether, the team behind the largest stablecoin by market cap, is launching a new platform offering a centralized alternative to leading DeFi money market protocols.

On June 17, Tether announced the launch of aUSDT, a stablecoin pegged to the U.S. dollar and backed by tokenized gold, specifically, Tether Gold (XAUt). XAUt is a gold-pegged stablecoin representing ownership of physical gold custodied in Switzerland.

“[aUSDT] by Tether provides long-term holders the opportunity to maintain exposure to gold, while in parallel obtaining a dollar-referenced Tethered Asset for payments and day-to-day economy,” Alloy said in a post on X.

Tether described aUSDT as its first “tethered asset,” offering the utility of fiat currency while deriving its value from a different asset.

aUSDT is also the first asset issued via Tether’s forthcoming Alloy platform.

Is Tether looking to compete with DeFi?

Tether appears to be positioning its Alloy platform as a CeFi alternative to top money market protocols like Aave and Curve, both of which allow users to mint native stablecoins (GHO and crvUSD, respectively) against over-collateralized positions of other crypto assets.

GHO and crvUSD positions are managed by smart contracts, with users able to permissionlessly deposit collateral, mint stablecoins, and burn their stablecoins to redeem the underlying collateral. Users also face liquidation should the value of their deposits risk under-collateralization due to price movements.

Similarly, permissioned Alloy users can mint aUSDT by depositing XAUt positions to a smart contract. Users can also manage their positions and redeem aUSDT for underlying XAUt, and face liquidation should the value of their collateral fall below a specific over-collateralization ratio.

Open Platform

Tether also teased Alloy’s upcoming deployment as an “open platform” allowing users to create over-collateralized Tethered Assets backed by a wide range of digital assets, potentially including yield-bearing products.

“Alloy by Tether is an open platform that allows [users] to create collateralised synthetic digital assets and will soon be part of the new digital assets tokenisation platform, launching later this year,” saidPaolo Ardoino, Tether’s CEO.

However, unlike DeFi protocols, Alloy requires that users undergo know-your-customer (KYC) verification to access the protocol.

Adam Cochran, Vice President of Operations at SBT Partners, believes Alloy could provide a first point of contact with DeFi for CeFi users.

“My best ‘guess’ at this set up is that they want Alloy to eventually be a consumer-facing DeFi/CeFi app… then eventually have yield-bearing assets backing Alloy assets, and make it an onboarding touch point to DeFi,” Cochrane said.

Cochran questioned the efficacy of the business model underpinning Alloy, emphasizing the storage costs and lack of yield associated with holding gold for users.

“On USDT they make revenue on the underlying bonds,” he said. “Gold costs to store and has no yield, so they don't really make money driving its growth.”

Still, Alloy charges a $150 fee for completing KYC verification. Tether also stands to earn liquidation fees in the event that users suffer margin calls.

Tether USDT is the largest stablecoin with a market cap of $112.4 billion after surpassing $100 billion for the first time in March. Tether Gold is the eighth-ranked stable token with a market cap of nearly $571 million, according to CoinGecko.

Alloy is registered as a stablecoin issuer in El Salvador. aUSDT was developed in partnership with Tether’s subsidiaries Moon Gold and Moon Gold El Salvador.