Tether Launches Gold-Backed Stablecoin Innovation and Analysis of the Legal Framework in El Salvador
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Tether Launches Gold-Backed Stablecoin Innovation and Analysis of the Legal Framework in El Salvador
Both companies are authorized to issue under Salvadoran law.
Navigating Web3 tides with focused insightsBy: Aiying Ai Ying
On June 17, 2024, Tether, the world's largest cryptocurrency company, officially launched Alloy by Tether, a revolutionary fiat-pegged asset backed by Tether Gold. Developed by Moon Gold NA, S.A. de C.V. and Moon Gold El Salvador, S.A. de C.V.—subsidiaries under the Tether Group—Alloy by Tether is authorized for issuance under Salvadoran law.
I. Project Overview
1. Token Overview
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aUSD₮: A collateralized stablecoin denominated in U.S. dollars, combining attributes of fiat and gold-backed tokens, with each aUSD₮ pegged to 1 USD.
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Collateral Asset: Tether Gold token (XAUt), representing ownership of one troy ounce of gold.
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Participants:
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Tether AbT: A licensed entity managing smart contracts and custodial services.
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Users: KYC-verified customers using XAUt as collateral.
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Liquidators: Authorized KYC-verified individuals or companies permitted to purchase XAUt locked in smart contracts at a discount.
2. Issuers
These tokens are issued by Moon Gold El Salvador and Moon Gold NA.
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Moon Gold El Salvador, S.A. de C.V.: Registered with the Commercial Registry of El Salvador, with its office located at Edificio Torre Futura, Oficina 6, Nivel 11, entre 87 y 89 Avenida Norte, Colonia Escalón, San Salvador, El Salvador.
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Moon Gold NA, S.A. de C.V.: Also registered with the Commercial Registry of El Salvador, sharing the same address as Moon Gold El Salvador.
3. Token Backing
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aUSD₮ is a stablecoin secured by Tether Gold tokens (XAUt).
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Tether Gold (XAUt): Each token represents ownership of one troy ounce of fine gold meeting the London Bullion Market Association (LBMA) “London Good Delivery” standards.
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The physical gold reserves are provided by TG Commodities Limited and held in custody on behalf of Tether Gold token holders.
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Users can search TG Commodities Limited’s “Find My Bar” website to identify the specific gold bar linked to each on-chain address.
4. Token Features
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Collateralization: Users can use XAUt as collateral to mint aUSD₮ tokens.
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Price Oracle: Used to track the value of XAUt and determine minting and liquidation thresholds for aUSD₮.
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Liquidation: If the collateral value falls below the liquidation threshold, XAUt may be purchased by liquidators to repay outstanding aUSD₮.
5. Technology and Standards
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Smart Contracts: Built on Ethereum blockchain using ERC-20 standard smart contracts.
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Technology Stack: Comprises a three-layer architecture including local blockchain, tokenization system, and business entities.
6. Tax Regime
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Tax Exemption: Under Salvadoran law, the nominal value of aUSD₮ and any associated gains or income are exempt from all forms of taxation.
Below is the minting and redemption flowchart for aUSD₮ and XAUt tokens:
II. Summary of El Salvador’s Digital Assets Law (Stablecoins)
1. From the white paper, we learn that both companies are authorized under El Salvador’s Digital Assets Issuance Law.
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According to Article 22 of this law, this document (the Relevant Information Document, RID) has been submitted to the National Commission of Digital Assets of El Salvador (CNAD), as part of Tether AbT’s application to register as a stablecoin issuer.
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Tether AbT has successfully obtained authorization as a stablecoin issuer under Article 5 of the Regulation on Public Offerings of Stablecoins.
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El Salvador’s Digital Assets Issuance Law aims to regulate the issuance and management of digital assets to ensure investor protection and market transparency. Article 22 stipulates that all proposed digital assets must submit a Relevant Information Document (RID) to the National Commission of Digital Assets (CNAD) for review and registration.
2. Relevant Information Document (RID):
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Submission Content: The RID includes detailed information about the token offering, such as token functionality, intended use, issuance method, and risk disclosures.
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Purpose: To ensure regulators have full visibility into the token issuance process and to guarantee transparency and legal compliance.
3. National Commission of Digital Assets (CNAD):
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Institutional Role: CNAD is responsible for reviewing and regulating all digital assets issued within El Salvador to ensure compliance with applicable laws and regulations.
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Review Process: CNAD evaluates the Relevant Information Document (RID) submitted by Tether AbT to assess its legality and regulatory compliance.
4. Regulation on Public Offerings of Stablecoins
Regulatory Background: This regulation establishes specific requirements and standards for stablecoin issuances, ensuring they function as digitally native, value-stable assets eligible for legal circulation. Article 5 requires stablecoin issuers to meet the following conditions:
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Provide a detailed description of the token and its functions.
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Demonstrate the stability of the token’s value, such as through pegging to fiat currencies or physical assets (e.g., gold).
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Disclose risks comprehensively and implement robust investor protection measures.
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Ensure transparency in the issuance and ongoing management of the token.
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