Liechtenstein-based crypto startup Novem has announced a gold-backed stablecoin. Considering the popularity of gold as a store of value and investment vehicle, Novem’s security token could attract significant investor interest.
Gold had been a method of payment for centuries before paper-based money was introduced. Even then, many governments have still backed their currencies with gold, reassuring their value.
The US-dollar had been gold-backed until the so-called “gold standard” was abolished in 1976. From this point, the international monetary system was made of pure fiat money.
Although the majority of economists does not believe returning to the gold standard would be a good idea, the financial crisis has resulted in declining confidence in the greenback. Thus, gold has become an attractive alternative for many who don’t believe in the value and sustainability of fiat currencies.
That’s why, over the past years, there have been various attempts by private companies to create gold-backed currencies. Liechtenstein-based company Novem has now announced a gold-backed stablecoin called “999.9”.
999.9 will be regulated as security token
Stablecoins have become increasingly popular. They come with lower volatility and are a more reliable store of value compared to other cryptocurrencies.
USD-based Tether had been the most popular stablecoin until about a year ago when rumors made headlines that the company behind Tether did not hold enough USD reserves to fully back their coin.
Since then, other stablecoins have emerged, True USD, Dai, Steem Dollars, soon there may also be Yen and AUD pegged stablecoins.
Novem’s token will be pegged to gold. Each token represents 0.01 gram of gold. As the token is a security token, it will be subject to strict financial market regulations.
The token sale has already started. A spokesperson of the company says, “At this point, over $1,035,000 in tokens have been purchased in private sales. There has been significant interest in the project in both the precious metals and blockchain communities.”
The physical gold underlying the currency will be stored in Germany and will be audited by a third-party, according to Novem.
There is a use case for gold based-stablecoins
“For thousands of years, gold has been synonymous with reliable value, but the processes for buying and selling gold have been shockingly inconsistent,” says Wolfgang Schmid, CEO of Novem.
The 999.9 token will be tradeable on a security token exchange, meaning traders can exchange large volumes of gold within seconds and 24/7.
This could turn out to be especially attractive for investors in unstable countries, who want to take their wealth across the border in an emergency case.
999.9 could also be useful for traders who want to temporarily park their crypto funds in a stable currency, but do not want to convert it into fiat or use a fiat-based cryptocurrency.
Besides 999.9, Novem will also introduce the NVM token, a utility token that can be used to pay for services and trading costs relating to the gold-based 999.9 token.
Big plans: Novem aspires to revolutionize the gold industry
999.9 runs on the NEO blockchain which is a technology to digitize assets and manage assets via smart contracts. The advantages of NEO are speed and functionality.
The token was developed by Wolfgang Schmid and Mario Schober, who are former traders of precious metals. “Novem is ready to revolutionize the gold industry with a new level of safety, transparency, and trust based on old-economy gold industry standards for transparency of value and new blockchain transparency of transactions,” says Schmid.
Gold has underperformed the S&P 500 index for the past five years and could turn out to be an attractive contrarian play over the next 10 years. Thus, a gold-based token that makes it easy and safe to invest in gold could attract significant investor interest.