Gold's Crypto Connect — USDT Stablecoin Issuer Is Top Bullion Holder Outside Big Central Banks

The rush to hold the safe-haven metal was not simply dominated by central banks alone. Investment bank Jefferies calculates that the gold-buying activities of crypto giant Tether exceeded the purchases of several central banks over the two quarters leading up to Sept. 30.

As of that date, the company held gold amounting to 116 tonnes, or roughly $114 billion as per the prevalent market price. This makes it the highest holder of bullion outside central banks.

This spotlights the emergence of technology and digital finance firms as new, dominant forces in the traditional safe-haven market. The findings of the investment banker also challenge the long-held view that central banks are the sole institutional drivers of the market. Along with the safe-haven buying, the surge has also been supported by sizeable private buying and strong inflows into exchange-traded gold funds.

Stablecoin issuers are now also looking to accumulate the precious metal on a scale typically associated with sovereign treasuries. Tether, the issuer of the largest stablecoin USDT, has been aggressively diversifying its reserve holdings, moving away from traditional short-term debt towards gold and other assets.

According to the Jefferies calculation, which was cited in a Reuters report, Tether acquired some 26 tonnes in the July-September quarter alone, or around 2% of total gold demand and roughly 12% of known central‑bank purchases. In the second quarter, Tether accounted for about 14% of central‑bank buying. Tether is holding 104 tonnes of gold as part of USDT's reserves, and another 12 tonnes backing XAUt, according to the report.

The net purchase of gold by Tether in the third quarter was higher than what was purchased by the central banks of China, Brazil, Indonesia and Turkey, among others.

Tether’s primary motivation for this large-scale accumulation is likely to boost the backing of its stablecoin, USDT, which is pegged to the US dollar. By holding a portion of its reserves in gold, the company seemingly aims to enhance stability, offering a diversified hedge for the digital currency and the massive pool of capital.