Gold-Backed Cryptocurrencies

[Peter89]

A forum dedicated to precious metals... a forum section dedicated to cryptocurrencies... and nowhere a thread dedicated to gold-backed cryptocurrencies? That’s unacceptable
There are many projects about gold-backed cryptocurrencies, as one can see from my signature I participate in the affiliate program of one of them so I'm particularly familiar with this one, but this thread is not just about Kinesis.

Imo gold-backed cryptos are good news for gold as they offer it the opportunity to become money within a digital society.
Currently gold is used only as an investment. It is considered as money too but one thing is considering something as money, another one is using it as money. AFAIK nowhere is gold used as everyday money.
I think sound money fans should embrace the opportunity offered by the blockchain technology (still a black box to me) as it allows for gold to be used as everyday money just as easy as one uses fiat currency.

In short, the benefits of PM-backed cryptocurrencies that come to mind are:
- cutting off banks' intermediation in everyday spending (provided a debit/credit card is available);
- cutting off brokers' intermediation in trading PM;
- low entry threshold, allowing low income households to save and invest in PM;
- easiness of investing in PM (only a smartphone is required. No need to travel to the next PM dealer, which in some countries can be located far away from where one lives);
- low trading spreads;
- secure storage.

 

[pmbug]

There are quite a few gold backed crypto tokens (in no particular order):

• Kinesis (KAU) - https://kms.kinesis.money/signup/KM13451574 (Peter's affiliate link)
• Aurus (tXAU) and AurusX (AX) - https://aurus.io/precious-metals
• Meld Gold (MCAU) - https://www.meld.gold/
• Gold Coin (GLC) - https://www.goldcoinproject.org/
• Paxos Gold (PAXG) - https://paxos.com/paxgold/
• Tether Gold (XAUt) - https://gold.tether.to/

There may be more out there that I'm not aware of.

The Perth Mint in Australia used to offer a gold backed digital token, but the program was discontinued:

PMGT | The Perth Mint Gold Token

The Perth Mint Gold Token (PMGT) has been discontinued.

www.perthmint.com

There have been a few other (non-government) tokens that also discontinued:

• DigixGlobal (DGX) - https://digixglobal.io

Here in the USA, individual States are considering legislation to create their own government run gold backed digital tokens:

Texas to issue a gold backed crypto?

No idea if this bill has legs, but Texas surprises sometimes so who knows... ... Based on the text of Senate Bill 2334, which was introduced by state Senator Bryan Huges (R), and House Bill 4903, which was introduced by state Representative Mark Dorazio (R), the legislators are looking to...

www.pmbug.com

Individual US States push for gold and silver legalization

A bill filed in the Indiana House would take important steps toward treating gold and silver as money and set the stage for the people there to undermine the Federal Reserve’s monopoly on money. Rep. Cindy Ledbetter and three cosponsors introduced House Bill 1043 (HB1043) for introduction on...

www.pmbug.com

It won't be long before some States make one and we'll be following in Zimbabwe's footsteps.

 

[Peter89]

Thanks @pmbug
when talking about gold-backed products the first question is whether it's really backed

Everybody knows Tether/USDT, apparently the 16th largest holder of U.S. treasuries globally, therefore probably another too-big-to-fail financial institution.
Few know that Tether issue a gold-backed cryptocurrency, Tether Gold, currently with a market cap of $500M and 7.6 tons of gold as reserves.

This is their website: https://gold.tether.to/
This is their Whitepaper: https://gold.tether.to/Tether Gold Whitepaper.pdf

Nowhere is the word audit to be found.

 

[Peter89]

Talking about audits

Kinesis Passes Q1 Audit 2024
View audit

and this has nothing to do with audits but it's a beautiful silver coin nonetheless

 

[pmbug]

Another token:

• Lode (LODE) - https://lode.one/

 

[Peter89]

We have an informative thread about Individual US States push for gold and silver legalization
I read that some states, like Arizona, are promoting among others a digital transactional currency backed by gold or silver

Under SB1633 the Director of the Arizona Department of Insurance and Financial Institutions would be required to issue specie (gold or silver coins minted by the state) and establish a transactional currency “as the director determines to be practicable.”

A transactional currency is defined as “a representation of actual precious metals, specie and bullion held in a depository account by a depository account holder that may be transferred by electronic instruction and that reflects the exact unit of physical precious metals, specie or bullion in the pooled depository account in its fractional troy ounce measurement.”

The depository would manage the transfer of the digital transactional currency between parties and ensure it is 100 percent backed by physical gold or silver held there.

In effect, individuals and businesses would be able to transact business electronically using currency backed by gold and/or silver held in the depository.

Under digital transactional currency backed by gold I can't imagine anything other than a gold-backed stablecoin.

 

[pmbug]

The language may vary a bit, but all the State level bills that seek to make gold/silver transactional are working towards that.

 

[pmbug]

Financial powerhouse HSBC (HSBA) is tokenizing gold for everyday investors in Hong Kong and claiming bragging rights as the first bank to create a blockchain-based real-world asset aimed at the retail marketplace.

The HSBC Gold Token, minted on the bank’s Orion digital assets platform, is available via HSBC Online Banking and HSBC HK Mobile App, the bank said in a press release on Wednesday.
...

https://www.coindesk.com/policy/2024/03/27/hsbcs-gold-token-goes-live-for-retail-investors-in-hong-kong/

HSBC Gold Token is a digital token on our distributed ledger, backed by physical gold bars kept in our vault.
...
Who can apply?

To be able to trade HSBC Gold Token, you need to have an active HSBC HK Investment Account and HK residential address registered with the bank.

You are not eligible if you are a US citizen, a US resident or a US tax payer, or have US nationality or a US address (for example: primary mailing, residence or business address in the US).
...

HSBC Gold Token | New way to own & invest in gold - HSBC HK

Gain ownership of physical gold held in our vault with HSBC Gold Token. Invest with peace of mind as the security is ensured on our private distributed ledger.

www.hsbc.com.hk

 

[pmbug]

Found on the Twitters:

...
You should note that an investment in the Product is not the same as acquiring a physical gold bar. In particular, under the Product, investors acquire only fractional ownership of the Gold (as defined in the section entitled "What is this Product?" below). When compared to directly acquiring a physical gold bar, investors holding only fractional ownership of the Gold represented by HSBC Gold Tokens ("Fractional Ownership") will be subject to certain limitations, including but not limited to the following (the "Limitations"):

• Investors will not have the ability to take physical possession or delivery of the Gold at any point, even in the case of insolvency of the Bank (in which an appointed Disposal Agent will be obligated under the Disposal Agent Appointment Agreement to liquidate the Gold and distribute the proceeds to the investors).
• Investors can only trade the Gold represented by the HSBC Gold Token via the Bank, subject to the below:
  • the price of the Gold represented by HSBC Gold Tokens is determined by the Bank according to the pricing mechanism of the Product;
  • any trading outside the Gold Trading Hours (as defined in the section entitled "What are the Key Features? – Pricing Mechanism" below) will be subject to a higher Bank Margin (as defined in the section entitled "What are the Key Features? – Pricing Mechanism" below) of 5% at maximum; and
  • suspension of dealing may be imposed by the Bank.

...

More details:

https://www.hsbc.com.hk/content/dam/hsbc/hk/docs/investments/gold-token/key-facts-statement.pdf

 

[Peter89]

Financial powerhouse HSBC (HSBA) is tokenizing gold for everyday investors in Hong Kong and claiming bragging rights as the first bank to create a blockchain-based real-world asset aimed at the retail marketplace.

The HSBC Gold Token, minted on the bank’s Orion digital assets platform, is available via HSBC Online Banking and HSBC HK Mobile App, the bank said in a press release on Wednesday.

They have regular independent audits, so it's better than an ETF.

This is no gold backed currency because it isn't designed to be a currency, i.e. everyday's money.
It's only for investment purposes.

It will help to drive the gold price up by sucking up liquidity, but in terms of Gold Standard it's irrelevant
imo

 

[pmbug]

Agreed. It's also tightly controlled and only tradeable for certain HSBC customers in a small geographic region. Even so, if it is a success from HSBC's point of view, it's possible that other banks might copy the program opening more doors for gold investment globally.

 

[Peter89]

"Each HSBC Gold Token represents ... 0.001 troy ounce of Loco London gold"
Why is the price of those 0.001 oz determined by the Bank instead of by the gold market?
This is nothing but some gold derivative.
imo

 

[Chigg]

What would the transaction fee be for using your gold debt card? And who gets it?

 

[Peter89]

@pmbug?

 

[pmbug]

I skimmed the transcript. Around 45 to 47 minute mark they talk about the Texas gold backed crypto legislation that is still pending. The guest suggest Kinesis to contact two individuals who are lobbying for the legislation and Kinesis' host says they will reach out to the lobbyists. The Young Pretender (author of the tweet) has misconstrued what was presented in the video IMO. The State of Texas isn't making any deals with anyone before legislation has even passed. $.02

 

[Peter89]

I skimmed the transcript. Around 45 to 47 minute mark they talk about the Texas gold backed crypto legislation that is still pending. The guest suggest Kinesis to contact two individuals who are lobbying for the legislation and Kinesis' host says they will reach out to the lobbyists. The Young Pretender (author of the tweet) has misconstrued what was presented in the video IMO. The State of Texas isn't making any deals with anyone before legislation has even passed. $.02

Kinesis is collaborating very tight with Citizens for Sound Money, which is one of the main sponsors of this legislation at state level all around the USA.
I think Kinesis know already all lobbyists

 

[nickndfl]

They would need to revalue spot gold in order for the crypto to have practical everyday use.

 

[Peter89]

They would need to revalue spot gold in order for the crypto to have practical everyday use.

It's not crypto, it's gold, and it has already practical use

 

[Peter89]

The Kinesis Mint has achieved certification from the International Organization for Standardization (ISO).

The ISO – an independent, non-governmental, international standard development organisation – awarded the Kinesis Mint the ISO 9001:2015certification, recognising the high quality of Kinesis Mint services and Kinesis Bullion products. Significantly, the certification makes Kinesis Bullion gold and silver products eligible for inclusion in US Individual Retirement Accounts (IRAs).

To meet the United States Internal Revenue Service (IRS)’s standard for inclusion in IRAs, all bullion products must be manufactured at an approved refinery and adhere to standardised quality requirements and weight specifications.

In achieving ISO 9001 certification, Kinesis Bullion has been recognised for the purity of our rounds and bars, with a minimum fineness of 9999 (gold) and 999 (silver).

Gold-backed digital currencies and physical gold business by one and the same company

 

[nickndfl]

I could see depositing physical gold into an account from which to draw currency, but somebody is going to get charged a fee somewhere either for conversion into local currency or when it's stored and/or spent. Just paying the fee to somebody else instead of the banks and Visa/MC/Amex.

They need to go back to physical gold and silver in circulation, but that will not happen in my lifetime.

 

[Peter89]

They need to go back to physical gold and silver in circulation, but that will not happen in my lifetime.

As long as we live in a modern society we will never transact as people did 3 centuries ago.
It's impossible to use pieces of pm as everyday currencies in a industrialised society, just think about something as usual as wire transfers. Imagine the costs, risks etc. associated with sending around pieces of gold and silver.
Wishing to a society to go back to physical pm as everyday currency - if this is what you meant - means wishing them to go back to pre-industrialisation.

 

[pmbug]

I disagree Peter. We have the technology now to manufacture metal foil notes (Goldbacks) that work as good as fiat paper notes. It's entirely feasible if people have the desire/will. Derivative structures such as electronic checking or payment systems can be built on top of gold denominated accounts just as easily as they do for fiat. Kinesis is a case in point on that issue isn't it?

 

[Peter89]

I disagree Peter. We have the technology now to manufacture metal foil notes (Goldbacks) that work as good as fiat paper notes. It's entirely feasible if people have the desire/will. Derivative structures such as electronic checking or payment systems can be built on top of gold denominated accounts just as easily as they do for fiat. Kinesis is a case in point on that issue isn't it?

Commander in Chief PMB!
sorry for the delay. If no tag and no Reply sometimes I miss posts addressing me...

Nick wrote physical gold and silver, I thought he was talking about coins and bars (or granules), not about something like Goldbacks.
I understood him as saying that we should go back to using coins and bars, so I replied that gold should leverage on current technology.

In goldbugs circles it's typical to meet a latent distrust in modern - particularly digital - technology when applied to the monetisation of gold.
I interpreted Nick's wordings as an expression of that distrust.
I'm not a gold historian but I think monetary gold has always leveraged on the technology of its time, which is - imo - what many stackers in their skepticism toward modern financial technology fail to recognise.

 

[pmbug]

...
Nick wrote physical gold and silver, I thought he was talking about coins and bars (or granules), not about something like Goldbacks. ...

Goldbacks are physical gold/silver.

 

[Peter89]

I could see depositing physical gold into an account from which to draw currency, but somebody is going to get charged a fee somewhere either for conversion into local currency or when it's stored and/or spent. Just paying the fee to somebody else instead of the banks and Visa/MC/Amex.

The point of the Gold Standard is not to save some fiat,
its advantage vs Fiat Standard is not that it works with lower transaction fees.
The advantage of the Gold Standard is to allow people to use money which doesn't lose purchasing power.

I read there are 20-30 millions Americans unbanked/underbanked.
50 millions Americans on SNAP, the food program. Forget Visa, MC and Amex. They have only cash.
When you compare Kinesis with the current banking system it's helpful if you put yourself in the shoes of these people too.
Even more if you exit the USA and consider billions of people around the world whose life depends on the purchasing power of a rapidly depreciating currency.

 

[nickndfl]

That is why there are more uncirculsted silver halves and dollars than dimes and nickles. Banks kept new rolls in vaults to back silver certificates according to The Coin Guy.

Just think if the BRICS had their own gold depository. It would immediately legitimize the country where it was located, the trading bloc and the currency.

Exports might slow because the currency/crypto would be so strong because everybody would want to own it.

 

[Peter89]

I could see depositing physical gold into an account from which to draw currency, but somebody is going to get charged a fee somewhere either for conversion into local currency or when it's stored and/or spent. Just paying the fee to somebody else instead of the banks and Visa/MC/Amex.

That's a very weak argument vs. any gold backed digital currency Nick, because a monetary system for free doesn't exist.
A monetary system needs people and organisations that make it works, and somehow they need to be paid.

If you argument is I don't take a gold backed digital currency unless it's for free, let's forget it.
Even if a monetary system is publicly financed, it doesn't mean that it's for free, you pay it with taxes.


You write "They need to go back to physical gold and silver in circulation"
Do you think that system would work for free?

Who pays those who mint that physical gold and silver?
Who pays those who facilitate their circulation?
Who pays those who certificate the purity etc.

I still don't know what do you mean with physical gold and silver, but whatever you mean by that I know it wouldn't be for free.

 

[Peter89]

I could see depositing physical gold into an account from which to draw currency, but somebody is going to get charged a fee somewhere either for conversion into local currency or when it's stored and/or spent. Just paying the fee to somebody else instead of the banks and Visa/MC/Amex.

Why paying the fee to somebody instead of the banks and Visa/MC/Amex.


Maybe because the company managing those gold backed digital currencies - unlike your bank - don't monitor your transactions?

Maybe because when you redeem your gold backed currencies vs. physical coins and bars, they - unlike your bank - don't ask you what do you need them for?

How about because that company - unlike your bank - doesn't lend out the fiat you give them - and make money out of it?

Maybe because - unlike your bank - that company is allowing you and all people around the world to replace fiat with gold in their every day spending?

 

[pmbug]

...
Few know that Tether issue a gold-backed cryptocurrency, Tether Gold, currently with a market cap of $500M and 7.6 tons of gold as reserves.
...
Nowhere is the word audit to be found.

Tether Announces Launch of Alloy by Tether: A New Digital Asset Backed by Tether Gold​

17 June 2024 – Tether, the largest company in the cryptocurrency industry, is excited to announce the official launch of Alloy by Tether, a ground-breaking tethered 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., both of whom are members of the Tether Group, Alloy by Tether aims to redefine stability in the digital economy by combining the strengths of a stable unit of account with the security and reliability of gold.

Alloy by Tether introduces a novel category of digital assets known as tethered assets, designed to track the price of reference assets through stabilization strategies like over-collateralization with liquid assets and secondary market liquidity pools. This innovative approach provides consistent value and stability between the reference asset and its tethered counterpart.

The first token in the Alloy by Tether lineup is aUSD₮. This digital currency is designed to track the value of one US dollar. What makes aUSD₮ unique is that it is over-collateralized by Tether Gold (XAU₮), which means it is supported by real physical gold stored in Switzerland.

Users can create aUSD₮ tokens using Tether Gold (XAU₮) as collateral. This is a very useful and innovative combination for users who want to engage in digital transactions, payments, and remittances with a currency that feels as familiar as the US dollar without having to sell their XAU₮. Currently, Alloy by Tether smart contracts are deployed on the Ethereum Mainnet. Users can mint aUSD₮ by depositing Tether Gold (XAU₮) as collateral through a process managed by Ethereum-compatible smart contracts. The aUSD₮ smart contract ensures transparency by keeping track of all collateral and minted tokens, using Price Oracles to constantly evaluate the Mint to Value (MTV) ratio.

Alloy by Tether is an open platform that allows the creation of different tethered assets with broader backing mechanics, potentially including yield-bearing products. This technology provides a modern approach to asset management for institutions as well by offering a secure, gold-backed digital asset that can be integrated into portfolios. Moon Gold NA, S.A. de C.V., and Moon Gold El Salvador, S.A. de C.V., both authorized by the CNAD in El Salvador, will handle the issuance and management of Alloy by Tether, catering to different customer segments and regulatory requirements.

“We are thrilled to announce the launch of Alloy by Tether, introducing a class of digital assets backed by gold and tethered to a reference fiat currency,” said Paolo Ardoino, CEO of Tether. “While the stabilization mechanism is different compared to traditional options like USD₮, this innovative solution marks an exciting milestone, and we eagerly anticipate how it will interact with the rest of the market. Moreover, we plan to make this innovative technology available in our upcoming digital asset tokenization platform as well.”
...

Tether Announces Launch of Alloy by Tether: A New Digital Asset Backed by Tether Gold - Tether.io

17 June 2024 – Tether, the largest company in the cryptocurrency industry, is excited to announce the official launch of Alloy by Tether, a ground-breaking tethered 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., both of whom are...

tether.io

So many questions about this vehicle...

 

[nickndfl]

I want a pizza coin backed by pepperoni with extra cheese.

 

[Peter89]

So, you are having a slow day, you have 2 hours free and don't know how to fill them up,
here is a long update about kinesis' status quo from their CEO and other mgmt members.
You can also choose from the list of subjects in the timestamps
Kinesis is gold and silver backed currencies.

Timecodes
0:00 START 0:15 Tribute to Jim Forsythe/INTRO
2:18 New Kinesis CIO, Nathan FIsher 2:53 New Kinesis departments 4:19 - Regional offices
5:59 - Overall view of progress/Disclosure of information 7:49 - Banking/Payments Service Positioning 9:01 - Aiming for mass market
11:30 - Need for Vertical integration 17:50 - Fiduciary duties 19:08 - Physical Mint and fee pool 20:36 - Mint not from KVT capital
21:37 - Mint provides vertical integration 21:48 - Vertical integration in banking

24:37 - INDONESIA update 28:07 - Elections effect on PT-POS 29:44 - 12 month marketing budget 30:20 - NU soft launch done, grand launch Sept

31:55 - Andy Maguire perspective 36:46 - Tom reflections on challenges/team strengths 39:20 - Banking/Asset Managment partnerships
41:07 - TIE BACK SECTION 41:53 - Purchase with card beta 43:53 - New USD on ramp in place 44:02 - More regulatory licences
44:27 - New on ramps for GBP, EUR, CAD, CHF 44:47 - US Bank accounts via new partnership 45:08 - EUR IBANs commercialisation

45:58 - Kinesis AURUM 48:15 - Everyday digital/physical synergy 50:04 - Aurums and ATM's 51:38 -

QUESTIONS SECTION
51:41 - KVT tradeability 52:48 - Latin America update 55:03 - Selective on LatAm integrations 56:52 - Same selectivity in Africa
57:16 - Silicon Capital/SA challenges 58:34 - Other Africa activity 1:00:00 - UNIVERSAL CURRENCIES/Real World Assets
1:03:19 - Basic elements for Kinesis success 1:04:59 - Everyday contractor payment 1:08:05 - Real World Assets
1:08:59 - Universal currency onramp 1:10:22 - Bug reporting and how can community help 1:12:47 - Kinesis Pay accessibility

1:14:25 - COMMERCIALISATION virtual cards 1:15:54 - MetalBack Merchant rewards 1:18:20 - Virtual Card lower fee
1:20:00 - MetalBack on all spending 1:21:15 - Marketing campaigns 1:22:00 - US cards 1:24:15 - EU Physical Card program
1:27:57 - Importance of Telesales function 1:31:30 - Partner program 1:38:49 - Mobile first browser app/iOS app
1:42:00 - More standardised Mobile app 1:44:18 - Brand strategy/core truths

1:48:23 - KINESIS PRO background 1:51:44 - Pro - prerequisites 1:52:52 - KMS/Pro integration 1:55:13 - Pro - new pairs/IEO's
1:59:15 - Bailee Company 2:01:19 - Terms of Service 2:02:57 - Public sharing of information

2:06:48 - WRAP UP

 

[pmbug]

Regarding post #8:

HSBC: the presentation of the gold token from Hong Kong

During the Hong Kong Fintech Week, the bank HSBC presented the gold token, the first RWA linked to physical gold.

en.cryptonomist.ch

HSBC gold token is just a glorified unallocated vault service.

 

[Peter89]

News from Indonesia
Nahdlatul Ulama (NU), "the world’s largest religious and social organisation, with over 100 million members and followers."
They are going to adopt Kinesis' gold backed tokens.


Key Features

• Shariah-Compliant Digitalised Gold: Ethical and secure gold savings through Kinesis gold (KAU)
• Gold to Mecca Program: Seamlessly save gold for Hajj and Umrah pilgrimages
• Government-Regulated Framework: Operates under Indonesia’s commodities regulator
• Integrated Pilgrimage Travel Services: Access approved Mecca travel packages directly

Rollout
The NUNOMICS APP is being introduced across NU’s vast network, ensuring accessibility for millions:

• 25,000+ Islamic Boarding Schools
• 125 million+ students
• Integration into educational curricula

Kinesis and Nahdlatul Ulama Launch NUNOMICS APP

Kinesis launches the NUNOMICS APP, a Shariah-compliant financial platform developed in collaboration with Nahdlatul Ulama.

kinesis.money