Vault, the Canadian-Swiss smart contract platform, recently announced that it has secured funding to launch USDVault, the world’s first 1:1 USD-pegged stablecoin backed by and redeemable for LBMA gold bullion stored in Swiss vaults. The company is backed by a consortium of precious metals focused private equity funds, explorers, miners, and refiners and has attracted talent from top schools and employers including Yale, Wharton, JPMorgan, Morgan Stanley, Goldman Sachs and Deloitte. The USDVault token is set to launch in Fall 2018 with the goal of giving institutional investors and high net worth individuals a secure way to enter the cryptocurrency space.
The Ethereum blockchain based USDVault token
The USDVault token is based on the Ethereum blockchain and is ERC20 compliant, with a fully audited and transparent verification and ledger system that is integrated with blockchain infrastructure. Vault has a legal opinion stating that each USDVault token acts as an “evidence of a deposit,” giving investors the ability to redeem the tokens for $1 USD or its equivalent in gold. Vault’s legal advisors include Bennett Jones, Gateway Law and Argentum Law. The USDVault token is able to remain gold-price neutral and stay pegged 1:1 to the US dollar through a sophisticated gold hedging process conducted by its fiduciaries and financial partners.
“Gold is uniquely positioned as the ideal backing for an investment-worthy stablecoin,” says Ranjeet Sodhi, co-founder at Vault. “It is value dense, can be stored securely and confidentially, and is resilient to political and regulatory uncertainty of the banking system. Vault’s fiduciaries hold the gold bullion that is deemed a cash equivalent per the Bank of International Settlements (BIS) as well as leading regulators and central banks, and holds a 0% risk weight when calculating capital requirements.”
Meeting the needs of institutional capital
Despite the allure of cryptocurrencies, the risk surrounding them has deterred many institutional investors from entering the market. Stablecoins originally emerged as a way to hedge against extreme price volatility and market risk, but most stablecoins focus narrowly on maintaining price stability and their overall risk profile is questionable from an institutional investor’s perspective. USDVault takes a broader and more rigorous risk management approach, by including mechanisms that significantly mitigate financial and operational risks, such as uncertain legal and political environments. In this way, Vault’s USDVault token aspires to do something ambitious and previously unattainable, to offer an institutional investment-worthy solution that reinvents the gold standard.
“Our legally compliant fiduciary, escrow, and gold vaulting structure enables us to offer a solution that appeals to institutional investors who have thus far stayed on the sidelines waiting for the market to mature,” says Arjun Ahluwalia, Legal Counsel at Vault. “Legal recourse, auditability and redemption into gold or fiat is a relatively new concept in the crypto-industry and will foster investor trust and confidence.”
USDVault provides a legal framework wherein all monies and backing gold are managed by licensed, regulated and supervised third party fiduciaries, which ensure enforceability of token holders rights, including the redemption feature of their tokens. Additionally, Vault’s technology offers a highly secure solution with extensive external audits of the code, and regular third-party audits of the gold operations to ease the minds of wary institutional investors and guarantee an exit opportunity into highly liquid assets: specifically, LBMA gold bullion.
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