On December 15, SEBA Bank, a licensed Swiss digital assets banking firm, unveiled a regulated digital token that is backed by physical gold and exchangeable for delivery. SEBA alleged that due to its regulatory-compliant nature and the mostly low volatility of gold prices, the gold token might eventually be used as a stablecoin for various on-chain transactions.
In that context, the design of the gold token has a lot of similarities to the gold standards, where the fiat currencies are underpinned by their exchangeability to physical gold and to the faith that is entrusted in the governments that issue them.
U.S. President Richard Nixon decided to take the dollar off the gold standard in 1971. At the time, it was established that every $35 in dollars could be exchanged for an ounce of gold according to the 1944 Bretton Woods system.
SEBA Bank CEO Guido Buehler stated:
“Gold plays a major role in the capital markets. With a market cap of over $11 trillion, it offers investors a reliable hedge against inflation and a store of value irrespective of economic turbulence.”
Gold-backed currencies are mainly known for their ability to get rid of hyperinflation, a common fear that is among crypto enthusiasts. Nonetheless, they also come with the downside of prolonging economic depressions as the government’s ability to print some stimulus is limited by the gold supply. Currently, no single nation in the entire world operates on silver or gold standards.
Buehler highlighted the development in this statement:
“Redeemable directly from refineries on-demand at any time; our gold token removes the frictions of owning gold for investors and provides a cost-effective solution for owning the asset fit for purpose in the new economy.”
In the past, SEBA launched a program for users to earn yields on cryptocurrency. It becomes the first bank in the nation to have got a digital custody license.