Major player: An illustration of the tether stablecoin cryptocurrency. The company, which holds around 140 tonnes of gold, plans to continue ploughing its enormous profits into bullion while also beginning to compete with banks in trading the metal. — Reuters
ZURICH: There are roughly 370,000 nuclear bunkers in Switzerland, a legacy of the Cold War that are now rarely used. One of them, though, is a hive of activity.
Every week, more than a tonne of gold is hauled in to the high-security vault, owned by crypto giant Tether Holdings SA, which is now the world’s largest known hoard of bullion outside of banks and nation states.
Over the past year, tether has quietly become one of the biggest players in the global gold market – the embodiment of a meeting of the crypto and gold worlds whose shared distrust of government debt is a major factor behind the surge in prices to never-before-seen highs above US$5,100 an ounce.
And yet relatively little is known about its inner workings, or its gold strategy.
When two of the most senior gold traders quit leading bullion bank HSBC Holdings Plc last year, the industry was abuzz with gossip about where they would head next; few guessed that the answer was tether.
In an interview with Bloomberg, chief executive Paolo Ardoino described the company’s role in the gold market as similar to that of a central bank, and predicted that Washington’s geopolitical rivals would launch a gold-backed alternative to the dollar.
He revealed that it plans to keep ploughing its enormous profits into gold, while also beginning to compete with banks in trading the metal.
“We are soon becoming basically one of the biggest, let’s say, gold central banks in the world,” he said.
Even in these historic times for the gold market, tether’s activities stand out.
It has rapidly stepped up its purchases, buying over 70 tonnes of gold over the course of last year for its reserves and its own gold stablecoin, according to a Bloomberg calculation.
That’s more than was reported by almost any single central bank: only Poland, which added 102 tonnes to its reserves, made larger declared purchases.
It is also more than was bought by any but the three largest exchange-traded funds (ETFs), which represent the collective activity of tens of thousands of individual traders and investors.
The company holds around 140 tonnes of gold, according to Ardoino, most of which are its own reserves, along with the bullion backing its own gold token.
That amount of metal is worth approximately US$23bil, the largest known hoard outside of those held by central banks, ETFs and commercial banks whose vaults underpin the main trading hubs.
And it’s only growing: Ardoino said that tether had been buying at a rate of about one to two tonnes a week, and intended to continue doing so for “definitely the next few months”.
“Then of course, based on the market, we are going to decide, but yeah, I think we will continue in this direction,” the 41 year-old Italian added.
Asked if there was a point at which tether might reduce its gold purchases, Ardoino said: “Maybe we are going to reduce, we don’t know yet.
“We are going to assess on a quarterly basis our demand for gold.” — Bloomberg
