Tether, the company behind the largest stablecoin by market capitalization, has launched a new digital token called "aUSDT" that is backed by its gold-linked cryptocurrency Tether Gold (XAUT). The move represents Tether's expansion into asset tokenization beyond just issuing fiat-backed stablecoins.

The aUSDT is pegged to the U.S. dollar, but derives its value by being over-collateralized with XAUT tokens. Each XAUT token represents ownership of one troy ounce of physical gold reserves stored in vaults in Switzerland.

Users can mint the new aUSDT stablecoins on the Ethereum blockchain by locking up XAUT as collateral. However, the system caps the amount of aUSDT that can be minted at 75% of the deposited XAUT value, acting as a buffer against volatility in gold prices.

"This innovative solution marks an exciting milestone as we make this technology available on our upcoming digital asset tokenization platform," said Paolo Ardoino, Tether’s Chief Executive.

The launch aligns with Tether's stated ambitions to move beyond just issuing its flagship USDT stablecoin, which maintains parity with the U.S. dollar. The company has invested in areas like bitcoin mining operations and artificial intelligence as it builds out an "expansive tokenization platform."

According to Tether, aUSDT provides gold investors with exposure to dollar-based decentralized finance applications without having to sell their tokenized bullion holdings into fiat currency directly.

While USDT remains the preeminent stablecoin for trading and payments in crypto markets, aUSDT offers an alternative payment rail overcollateralized by a commodity historically exhibiting low correlation to the U.S. dollar.