Renowned economist and gold advocate, Peter Schiff, has recently sparked fresh controversy in the stablecoin industry. Schiff, a critic of tokens linked to US dollar reserves, believes that the reliance on what he perceives as an unstable fiat currency is lacking in logic given the existence of more stable assets.
This has rekindled the ongoing debate about the most appropriate asset to back digital coins that guarantee a steady peg.
Schiff has questioned the rationale behind supporting a token pegged to a currency which is susceptible to inflation. He expressed his understanding of Bitcoin, but expressed skepticism for US dollar stablecoins in a social media post. Schiff highlighted that unlike fiat money which can be printed in large quantities, gold has a limited supply and has been used as a monetary asset for centuries. According to him, gold is not easily devalued by inflation or reckless monetary policies.
Reports suggest that gold-backed stablecoins are gaining traction among investors who are concerned about inflation and the weakening of the dollar. Stablecoins such as Tether Gold (XAUT) and Paxos Gold (PAXG) enable users to transact digital claims on physical gold. These assets provide the same speedy transfers and high liquidity as dollar-pegged coins, but they tie each token to actual metal stored in vaults.
Regulatory bodies worldwide are scrambling to set up clear regulations for stablecoin reserves. In the US, Congress members are contemplating stricter reserve and audit requirements, while Europe and Asia are formulating their own rules to ensure transparency and protect users. Schiff’s advocacy for gold adds a fresh perspective to these discussions, potentially prompting regulators to consider whether commodities could serve as backing for tokens under specific regimes.
Reactions to Schiff’s tweet were mixed. While it received over 500,000 views within 24 hours, some critics praised his perspective on fiat risk, while others warned that gold-backed tokens come with higher fees and burdensome custody costs. They argued that transferring metal or setting up physical reserves adds complexity compared to exchanging dollar-backed coins at a bank custodian.
Investors also pointed out that stablecoins are widely used in lending, trading, and payments within DeFi platforms. Dollar-pegged tokens like USDC and USDT dominate these flows because they are directly connected to existing banking systems. On the other hand, gold-backed coins are typically held as digital bullion rather than used for everyday transactions.
