Crypto goes full circle with “government-guaranteed gold-backed stablecoin”

By Ben Munster

A crypto startup is launching a token backed by government-guaranteed gold reserves, proposing it—perhaps somewhat ironically—as an alternative to volatile dollar-backed alternatives. 

The Australia-based InfiniGold is launching the “Perth Mint Gold Token,” a crypto token backed by digitized certificates representing gold held in a “network of central bank grade vaults.” Those vaults are operated by Perth Mint, a gold refiner “guaranteed” by the government of Western Australia. Each token represents an ounce’s worth of Perth Mint gold. 

InfiniGold positions its token as a non-inflationary alternative to dollar backed stablecoins. Given that the original cryptocurrency, Bitcoin, was itself a reaction to inflationary economics—and has been championed as a better store of value than gold—it may be a sign that stablecoins have reintroduced the perils of seigniorage.

Indeed, InfiniGold compares its product with dollar-backed stablecoins, saying, “PMGT offers owners superior transparency, credit quality, risk diversification and hedging against market volatility as the token represents physical gold, which has historically been much more stable and a well-understood store of value.”

“There’s basically a paradox,” said Nic Carter, the founder of crypto analytics firm Coin Metrics and a partner at crypto fund Castle Island Ventures. “Stablecoins are useful for routing around governments and transacting in low trust environments. But if you need the reserves to be guaranteed, you’re relying on those same institutions.” 

“That said,” he added, “a credibly gold backed stablecoin could well compete with the dollar backed ones—they all have that same constraint.”

But InfiniGold CEO Andreas Ruf says PMGT brings with it a host of hitherto unattainable privileges, and allows investors to tap directly into the mainstream gold markets. “It’s a gold token that can be converted into the same gold that the institutional gold market trades, i.e a ‘long gold position.’”

He also said the token represented a kind of hedge—a way to "diversify from volatile cryptocurrencies like bitcoin or Ethereum."

The PMGT token will be a Ethereum-based upgrade of GoldPass, an app launched last year which represents the Perth Mint gold stocks as digital certificates, letting users buy and sell gold electronically. It calls to mind the proclamations of notorious goldbug and Bitcoin critic Peter Schiff, who gushed in a recent televised debate that he makes use of his substantial gold holdings to buy coffee.

But stablecoins are notoriously tricky to audit, and Carter raises additional concerns: “How do the holders verify the reserves aren’t being abased, or that the ratio isn’t out of whack?”

To this, Ruf points to the company’s working relationship with a number of trusted auditors and financial operatives, among them accountancy firm Ernst & Young, and former JP Morgan Managing Director Jon Deane. He added that the Western Australian government had directly approved the Perth Mint-InfiniGold collaboration. 

“Right from the start of the project,” he said, “InfiniGold placed a strong emphasis on security, appropriate risk controls and regulatory compliance.” Requests for comment to the Australian government are yet to be returned. 

Recommended News