Are KAU and KAG stablecoins?

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Yes. A stablecoin describes a cryptocurrency that derives value from it being tied to an underlying currency, commodity or other financial assets.

This means that the value of the currency is permanently fixed to the underlying asset(s) and reacts to its price fluctuations. For example, Tether (USDT) is pegged to the value of the US Dollar, so the price of Tether should always be $1 regardless of dollar price changes against other cryptocurrencies. 

Kinesis gold (KAU) and silver (KAG) are backed by one gram of fully allocated fine gold and one ounce of fully allocated fine silver, respectively. They are classified as stablecoins because they are tied to physical bullion and their utility as money, spendable via the Kinesis Card.


What is the purpose of a stablecoin?

Stablecoins must function as a store of value, medium of exchange and unit of account. They should also be fungible (interchangeable with another identical asset), spendable and divisible. 

Stablecoins aim to solve the volatility problem associated with traditional cryptocurrencies, which are not backed by anything and are prone to price fluctuations that make them less suitable for everyday transactions. 

While there are many stablecoins on the market, fiat-backed coins are not exempt from the principles of the fractional reserve banking system. For example, Tether (USDT) claims that one USDT is always backed by its equal dollar value despite the fact that there will always be more dollars ‘in existence’ than in circulation. This means fiat reserves can be much less stable and tangible than physical commodities such as gold or silver.

Unlike Tether, Kinesis gold (KAU) and silver (KAG) offer price stability by backing digital asset currencies with fully allocated and audited precious metals. These assets have maintained their value throughout history, and can now be used as everyday currency with the Kinesis Card.