Gold-Backed Stablecoins Hit the Market—a Blow to Donald Trump’s GENIUS Plan?
Key Takeaways
- Two new gold-backed stablecoins have launched recently.
- USDKG and GLDY present an alternative to Treasury-backed coins.
- Could the U.S. stablecoin push backfire if issuers shift to alternative reserve assets?
Political motivations behind the GENIUS Act include fostering American innovation and securing the dominance of the U.S. dollar.
But perhaps most importantly from Washington’s perspective, the stablecoin regulation is expected to increase demand for U.S. government debt.
However, in recent days, two gold-backed stablecoins have been announced that don’t require Treasury reserves at all.
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Kyrgyzstan Launches Stablecoin Backed by Gold Reserves
With over 40 metric tons of the precious metal in its national reserves, Kyrgyzstan is gold-rich for what is ultimately a tiny economy.
But rather than simply selling its reserves, the government is looking to raise cash by issuing a new stablecoin backed by the central bank’s gold.
Issued by a company owned by Kyrgyzstan’s Ministry of Finance, USDKG initially launched on Ethereum and TRON, with plans to add support for other networks at a later stage.
The project’s website cites all the usual stablecoin advantages of real-time settlement, seamless cross-border payments, and decentralized finance (DeFi) integration.
For institutions, it also offers “low-risk yield backed by physical gold reserves,” but the website doesn’t disclose further details.
According to local media , over $50 million worth of USDKG was minted toward the end of October.
The launch of USDKG reflects the Central Asian nation’s broader push into crypto, which includes the launch of a new digital asset bank earlier this month.
Kyrgyz leaders are already embroiled in stablecoin politics. President Sadyr Japarov has protested Western sanctions against A7A5, a ruble-pegged coin with ties to banks in his country.
GLDY Offers Stablecoin Yield Backed by Gold
Officially launched on Nov. 14, GLDY is a kind of hybrid token that shares the features of a yield-bearing stablecoin and tokenized gold.
The token is designed to maintain a USD peg. However, it offers up to 4% annualized yield, generated by deploying the underlying assets in gold-leasing programs.
In comments to CCN, Henry McPhie, CEO of GLDY issuer Streamex Corp, called the model “one of the most significant innovations in gold investment in decades,” which is “reengineering one of humanity’s oldest assets for the digital and institutional era.”
Not What Washington Had in Mind
While Streamex is headquartered in Florida, neither USDKG nor GLDY is the kind of stablecoin U.S. lawmakers had in mind when they passed the GENIUS Act.
The stablecoin regulation is intended for coins like USDT and USDC, whose reserves mostly consist of short-term Treasury bills. And while it is rarely stated explicitly in Washington, increasing demand for U.S. government debt is a major consequence of the recent stablecoins push.
President Donald Trump and Treasury Secretary Scott Bessent have made lowering the cost of government borrowing one of their flagship economic policies.
The largest stablecoins are already big enough to influence the Treasury market. With some projections forecasting trillions of dollars in USD-pegged coins by the end of the decade, increased demand could lower Treasury yields in a meaningful way.
Treasuries Lose Their Shine as Gold Demand Surges
The rise of stablecoins as a major buyer of American bonds comes at a time when other important players are moving in the opposite direction.
Around the world, central banks have moved to reduce their exposure to U.S. government debt. For instance, in October, the…
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