Tether is putting its $23 billion gold stockpile to work. The stablecoin issuer now lets holders of its tokenized gold product, XAUT, borrow against their bullion without selling it. The move mirrors the bitcoin-backed lending model that has grown popular among crypto investors wanting liquidity while keeping exposure to price upside.
The loans operate on the same principle as bitcoin-backed loans offered by firms like BlockFi and Nexo – but with physical gold as collateral. XAUT is a token redeemable for one troy ounce of LBMA Good Delivery gold held in Tether’s vaults. By pledging that token to a lender, a holder can draw a cash loan, typically in USDT. If the loan is repaid, the XAUT is returned. If not, the lender liquidates the gold.
Tether’s gold reserves are large. The company reported in its latest attestation that it holds roughly 241 metric tonnes of gold, valued at around $23 billion at current prices. That makes it one of the largest corporate gold holders in the world. The lending product essentially turns that inert asset into an income-generating one, both for Tether (via loan fees) and for XAUT holders who want leverage.
The product targets institutional clients, according to the announcement. That makes sense – the minimum loan size and compliance requirements are likely too high for retail traders. But the expansion of tokenized gold lending could draw new capital into the crypto ecosystem from traditional gold investors who have been sitting on the sidelines.
For the broader market, the development indicates that tokenized real-world assets are gaining real utility beyond just passive holding. XAUT’s market cap is modest compared to Tether’s USDT dominance, but this lending facility could boost demand for the gold token. If borrowers need to acquire XAUT first, buying pressure may rise.
The key risk is the same as any overcollateralized lending product: if gold prices drop sharply, borrowers could face margin calls or liquidation. Tether’s reputation also remains a watchpoint. The company has faced regulatory scrutiny over reserve transparency, though its gold reserves are regularly audited by a third party.
What to watch next: adoption among institutional gold traders, and whether Tether extends the model to other tokenized assets. For now, XAUT holders have a new tool to monetize their bullion without leaving the crypto orbit.
Tether lets holders of its gold token borrow cash using their gold as collateral
Tether now allows holders of its gold-backed token, XAUT, to take out loans using their gold without selling it. This helps large investors access cash while keeping ownership of their gold holdings.