Garnex — an electronic payments project is the latest entrant into the expanding pool of digital currency providers looking to stable currencies. With the wild volatility swings common in cryptocurrency and the emerging trend of moving away from fiat currencies, stablecoin projects are beginning to take center stage.
Governments and central banks have even joined the race with several commentators forecasting that 2020 will be the year of the central bank digital currencies (CBDCs). For the mainstream financial sector, the goal appears to be one of preventing private currencies from disintermediating the global banking network.
Gold-Supported GLD Digital Currency
In a press statement shared with Blockonomi, Garnex unveiled its gold-supported digital currency — GLD. According to Garnex, each GLD is supported by 1/1,000 of an ounce of gold mined by the Garnex Gold Corp.
For Garnex, the GLD currency signals a return to the ‘gold standard’ and the establishment of a digital currency that delivers price stability. Since the 1970’s governments and central banks have abandoned the gold or silver standard in favor of fiat currencies not supported by an underlying tangible asset.
GLD joins an expanding pool of asset-backed tokens which are becoming an emerging trend in the evolving crypto landscape. As previously reported by Blockonomi, four Iranian banks supported a plan to introduce a gold-backed token earlier in 2019.
As reported by Forbes last week, Aulus, another startup is looking to launch a tokenized gold cryptocurrency. According to the Aulus, the proposed token aims to deliver price stability by being tied to a physical asset while leveraging blockchain technology to provide robust security for the token.
In a private message to Blockonomi, the Garnex team highlighted the suitability of gold as a basis for a global digital currency stating:
“Gold, like BTC is finite and a storage of value. Hard to transfer, but stable in an emergency and a hedge against inflation. Through cryptocurrency you can take an asset of this nature and turn it into the foundation by which a usable currency is evaluated. With gold behind the transfer of wealth in the world we are at less risk of higher inflation, greater debt and ideally economic recession.”
Asset-Supported, Not Asset-Backed
Unlike other stablecoin projects like Tether and USD Coin, the GLD token is not redeemable for gold. Commenting on the unique characteristics of its digital currency, the Garnex team remarked:
“Garnex GLD currency is not asset backed, it is asset supported. the difference being that users do not have the underlying right to the asset, rather the comfort in knowing the real value of their currency. The reason for creating GLD is to re-introduce the gold standard to a global audience who will have the option to store and transact with their wealth in a more transparent currency then the present fiat options. GLD combines the best use case of fiat being liquidity, and the best use case of cryptocurrency being global transferability, into one currency for all to transact.”
According to Garnex, the GLD token will act as a global currency that has no ties to any economic performance. Thus, GLD will not be subject to inflation or other types of economic upheaval.
Several commentators have been sounding warnings over the precarious nature of major fiat currencies like the U.S. dollar (USD) and Euro (EUR) given the monetary policy decisions being enacted by various central banks. Critics opine that quantitative easing (QE) and lower interest rates could lay the foundation for another global financial crisis.