Gold Stablecoins: Financial Innovation or Latent Risk?
- ccancino3
- Mar 27
- 3 min read
What are “stablecoins”? Does this type of cryptocurrency actually represent a safe alternative for investors or does it entail hidden risks? Learn the details about the emergence and management of these digital assets linked to the price of gold.
Stablecoins: A Promise of Stability
The rise of cryptocurrencies brought with it the idea of a digital alternative to traditional money. However, the extreme volatility of Bitcoin and Ethereum showed that they could not yet replace conventional assets.
In order to address this issue, stablecoins were born, cryptocurrencies designed to maintain a stable value as they are backed by assets such as the dollar. Their purpose is to facilitate fast and economic international transactions without the uncertainty of the crypto market. Companies like PayPal and Stripe have begun to integrate them into their platforms, while financial institutions like the Bank of America are exploring the possibility of issuing their own digital currencies.
Gold as Backup
As stablecoins gained popularity, some investors wondered: what if instead of dollars, the backing was a more stable and valuable asset? This is how gold stablecoins emerged, cryptocurrencies whose value is allegedly linked to physical gold reserves.
In theory, each token (digital asset) represents an exact amount of gold stored in high-security vaults, allowing investors to benefit from its stability without the need to physically possess gold. Projects like Tether Gold and Paxos Gold promised the best of both worlds: Gold’s security and digital accessibility.
However, the market began to question the transparency of these projects. Who guaranteed the existence of gold? What did each token back? What would happen if the issuing company collapsed? Such questions called into question the security of these cryptocurrencies.
The TerraUSD Case: A Warning
The history of the TerraUSD cryptocurrency highlighted the risks of stablecoins. This algorithmic stablecoin maintained its parity with the US dollar through an automatic buying and selling system with another cryptocurrency, Luna.
For months, TerraUSD seemed unbreakable, but in May 2022 its mechanism collapsed. In a few days, it lost its value, and billions of dollars evaporated, affecting investors who believed they were betting on a safe asset.
Although the issuers of the gold stablecoins claim to have a different structure, this crash demonstrated that any trust-based digital asset can be subject to unexpected risks.
Liquidity and Confidence: Key Factors
One of the main challenges of gold stablecoins is their liquidity. While physical gold can be sold anywhere in the world, stablecoins depend on specific platforms and changing regulations.
Furthermore, these digital assets depend on the credibility of their issuer. In the crypto world, trust can crumble with a single negative piece of news, instantly affecting the value of the tokens.
On the other hand, physical gold has proven throughout history that it does not need intermediaries or digital validations. Its value does not depend on the stability of an issuing company or the trust in a platform.
Stablecoins of gold: Financial innovation financial?
Although these cryptocurrencies “supported” by gold may seem like an attractive alternative, their success depends on the trust in their issuers. Instead, physical gold continues to be the best option for those seeking long-term financial stability and security. In times of crisis, when currencies lose purchasing power, markets collapse and cryptocurrencies crumble, Gold continues to be the safe haven par excellence. Its value is universal, its demand constant and its liquidity unquestionable.
Protect your Money
Aktagold's mission is to help people around the world protect their money from the economic and financial instability of their countries of origin by giving them access to saving in physical gold, safely stored in Canada’s most secure vaults, an option that used to be reserved only for the wealthiest ones.
Contact us and learn more about how to protect your wealth by saving in gold.
References: