Gold Standard, USDT & Fractional Reserve Banking
Yesterday we touched on Fractional Reserve Banking and how owning physical gold and silver bullion can remove that inherent or consequential risk for you.
In the crypto world many people use USD Tether as their ‘safe haven’ or ‘stablecoin’ rather than leaving the blockchain ecosystem and converting to cash/Fiat. USD Tether is BIG. It routinely equates to around 20% of all crypto trades on a daily basis, second only to Bitcoin. It has a total market cap of $2.8b but routinely trades 5x that in a 24 hour period. It purports to be 100% backed by USD held on deposit and generally maintains a 1:1 pricing with the USD.
However they are incredibly opaque, offering no independent verification of those funds on deposit, and this week were exposed as holding only 74% in actual USD by their very own lawyers. They even offered a Fractional Reserve Banking analogy as a defence! To wit:
“This sort of ‘fractional’ reserving arrangement is similar to how commercial banks work. No bank holds in liquid cash more than a small percentage of depositors’ money”
There are also the New York Attorney General allegations last week of affiliate Bitfinex using some of this to plug an $850m shortfall it had. And let’s not lose sight of the fact that all that USD is held on deposit in US banks! In other words, Fractional Reserve banking meets crypto. The irony is many crypto investors are drawn to the decentralised blockchain ‘crypto’ currencies to escape that very same centralised, fractionalised banking and fiat system and yet use USDT as their stablecoin, even if only often for short periods of time.
In stark contrast Ainslie Wealth has created fully backed (100%) blockchain based gold and silver tokens as an alternative to the so called stablecoin of USD Tether or similar Fiat alternatives. If you missed it, we launched it here back in February.
So, in contrast against USDT, Gold and Silver Standard tokens are:
- Fully transparent 24/7 via https://www.goldsilverstandard.com/
- Fully and independently verified by BDO every quarter and processes in place to prevent movements between audits with that report available to view at any time on the website.
- Backed by fully insured and securely, independently stored physical gold and silver bullion not fractional fiat cash in a centralised bank.
- Redeemable for the real gold and silver bullion underlying them at any time.
- Domiciled and stored in high regulatory environment Australia not overseas ‘reg lite’ jurisdictions.
So, in the context of a truly safe and stable stablecoin, there really is no comparison.
To learn more about Gold Standard and Silver Standard tokens visit the website by clicking here.