We have heard from many quarters that bitcoin is considered “digital gold.” This interpretation does indeed have more than one basis, as we argued in our in-depth analysis on May 9, 2025, although it obviously lends itself to critical and conflicting opinions. But today there is something new: the founder of Tether, instead of considering bitcoin a form of digital gold, prefers to consider gold a form of “natural bitcoin.” Beyond the play on words, let’s focus more on the facts and therefore on the numbers.
Tether – now authorised as a currency issuer (in US dollars, to be precise) under the Genius Act – wants to diversify its reserves by allocating part of them to physical gold. It had already tried this with the Tether Gold (XAUt) token launched in 2020, equivalent to one troy ounce, divisible up to $0.00001. However, like its competitor Pax Gold (PAXG) launched by Paxos a year earlier, it was not successful, with a capitalization of less than $1 billion.
But there are some figures that make it clear that Tether is clearly geared towards massive investments in gold. First of all, gold bullion reserves deposited in Zurich amount to almost $9 billion, while XAUt’s capitalization is less than $1 billion. This means that the group is building up overall reserves of the yellow metal. But then there is the investment in mines, not through mining company shares, but through royalties, investing, for the moment, in minority stakes in Elemental Altus, listed in Toronto and about to merge with its rival EMX; we are talking about small figures (around $100 million) when compared to Tether’s billion-dollar profits in the first half of this year.
The other event that portends further significant rises in the price of gold is the tokenization of the precious metal (i.e., bars weighing more than one kilogram, because coins are already sufficiently fragmented), which would allow an entire bar to be sold in small pieces, but above all to offer gold as collateral for the margining of derivatives. Many have tried to tokenize gold, but now the project is being conceived and carried out by the World Gold Council (WGC), a consortium representing the mining industry that wants to start with the world’s largest market: London.
The “Loco London” wholesale gold market is the world’s largest physical trading circuit, backed by the vast reserves of major international commercial banks and the storage capacity of the Bank of England. Transactions are conducted over the counter (OTC), that is, directly between the parties rather than through a central clearing house.
There are two types of transactions on this market: those for “allocated” gold, which involve a specific gold bar, and those for “unallocated” gold, which involve requesting a quantity of gold without specifying the bar. According to the WGC’s proposal, a third type of OTC gold transaction would be created in London. The project would start with a pilot phase involving major banks and trading companies as co-owners of the underlying gold.
In January this year, the London Bullion Market Association (LBMA) launched a new (permissioned) blockchain at the heart of the Gold Bar Integrity program to track every new bar leaving refineries. This would certify the “birth” of each new bar by providing it with a non-counterfeitable digital identity. As with any transition from the physical to the digital world through tokenization, this also represents the critical point of greatest risk: once false data has been written to a blockchain, it can no longer be modified and must be corrected in other ways. But the point is that it becomes difficult to certify a physical phenomenon without fraudulent manipulation in order to give it an “authentic” digital life.
Assuming that this step can be taken with acceptable reliability, we will find ourselves in the presence of “gold coins” (tokens) expressed in digital form and therefore easily traceable and transferable (because they exploit blockchain technology) that will have to compete with cryptocurrencies and stablecoins guaranteed by a wide variety of assets (including gold). However, if the process is carried out properly, the tokenization of physical gold risks being subject to Gresham’s law, whereby bad money drives out good money (from circulation), thus relegating tokens to a role of digital collateral. In our opinion, this role would still be sufficient to give a new and vigorous boost to the precious metal par excellence.
Disclaimer
This post expresses the personal opinion of the Custodia Wealth Management staff who wrote it. It is not investment advice or personalized advice and should not be considered an invitation to carry out transactions on financial instruments.
