Perth Mint Gold Token (PMGT) listed on KuCoin
PMGT is a break from the usual tradition of gold-backed stablecoin cryptocurrencies.
Perth Mint has about $3.5 billion of gold and other assets sitting in its vaults, fully guaranteed by the government of Western Australia, which also wholly owns the mint. That guarantee extends to GoldPass digital certificates, which the mint has been issuing since 2018.
The Perth Mint Gold Token (PMGT) is an effort to bring those GoldPass certificates to the blockchain, via a partnership with InfiniGold, in the form of ERC20-standard Ethereum tokens. Functionally, PMGT is a stablecoin that's backed by GoldPass certificates.
PMGT has now scored its first cryptocurrency exchange listing, popping up on KuCoin today. This could be interesting, for several reasons.
Given the overlap between gold and Bitcoin, the general distrust of fiat currency among many early Bitcoin users and the performance of gold since the Bitcoin peak in 2017, it's a bit unusual that gold-backed stablecoins haven't taken off to anywhere the same degree as USD-pegged stablecoins like Tether.
There are quite a few potential explanations for this though.
While gold-backed stablecoins aren't especially uncommon, how closely they actually mirror gold prices depends on which coin and market you're looking at. The chart below shows the prices of two different gold-backed stablecoins, PAXG (blue) and DGX (green), and how they've compared to gold (gold) over the last few months.
As you can see, although both tokens broadly follow gold prices, the stablecoins tend to be more volatile than the metal, especially DGX. This may be largely down to their relatively sparse trading volume and low liquidity, which could simply be a function of the amount of how many tokens they can put into circulation. The success of Tether as a stablecoin, despite people's misgivings about it, highlights how important liquidity availability is to adoption.
This is one of the spots PMGT stands out.
"As The Perth Mint is the largest refinery of newly mined gold in the world, we’ve got an unprecedented depth of liquidity to bring to the market with the Perth Mint Gold Token," says InfiniGold CEO Andreas Ruf. "We haven't simply purchased a couple of gold bars, put them in a vault and then tokenised them. We can tap into billions of dollars worth of gold stored at The Perth Mint."
That tendency of just tokenising a couple of gold bars, or in some cases minting a lot of ostensibly gold-backed cryptocurrency without bothering to get any gold at all, could also help explain the impressive mortality rate among gold-backed stablecoins. By some estimates, around half of all recently-deceased stablecoins were gold-backed stablecoin projects.
It could be even more than half if you count all the ICO schemes where someone raised millions of dollars, promised to buy millions of dollars of gold, and then just disappeared instead.
Gold-backed stablecoins were left with something of a tarnished reputation following the ICO boom, which could also help explain why they haven't caught on to the same degree as fiat-pegged stablecoins like Tether.
PMGT is weighing in on the opposite end of the scale to most gold-backed stablecoins, bringing a degree of pre-existing legitimacy, and existing reserves, to the table. In this way, it's possible that PMGT could get traction as the first gold-backed stablecoin to actually make it big.
"We're really excited to be listing the world's first token which is backed by a government guarantee on the underlying asset. This is another step forward in our mission to spark mainstream adoption of crypto-assets," said KuCoin founder Johhny Lyu.
Verified KuCoin users can start trading PMGT now, and their holdings can be redeemed for physical gold via the Perth Mint's GoldPass.
Disclosure: The author holds BNB, BTC at the time of writing.
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