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New Stablecoin Backed by Gold
CoinTelegraph reports Iran and Russia Want to Issue a New Stablecoin Backed by Gold
The Central Bank of Iran is reportedly cooperating with the Russian government to jointly issue a new cryptocurrency backed by gold.
According to the Russian news agency Vedomosti, Iran is working with Russia to create a “token of the Persian Gulf region” that would serve as a payment method in foreign trade.
The token is projected to be issued in the form of a stablecoin backed by gold, according to Alexander Brazhnikov, executive director of the Russian Association of Crypto Industry and Blockchain.
The stablecoin aims to enable cross-border transactions instead of fiat currencies like the United States dollar, the Russian ruble or the Iranian rial. The report notes that the potential cryptocurrency would operate in a special economic zone in Astrakhan, where Russia started to accept Iranian cargo shipments.
It’s hard to do anything but snooze over this news.
What does “backed by gold” even mean? How? Can you take delivery?
Would you trust Iran and Russia have the gold that they say they have?
What other than weapons and grain, do Iran and Russia even trade with each other? Enough of anything to matter globally?
Oil Priced in Gold Silliness
The above article is on the heels of nonsense about Saudi Arabia pricing oil in gold.
That would not matter either. Outside of something completely illiquid like Yap Island stones, it does not matter what oil is priced in.
Currencies are immediately fungible. One does not need dollars to buy oil right now. It’s a trivial matter to exchange yen for dollars or vice versa.
Gold is routinely priced in dollars. But you can buy gold in any country in the world right now without needing dollars. There are in fact multiple simultaneous quotes for any commodity right now based on exchange rates.
Think of a grocery store in the US. What, besides confusion (and constantly changing prices) would happen if a store put prices in euros?
Would you need euros to buy anything? No. Rather the prices would immediately adjust based on exchange rates.
Simultaneous Prices
Perhaps it would help if you envisioned a US grocery store where three simultaneous prices were listed: one in dollars, one in euros, and one in gold ounces.
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In the US, the dollar price would be relatively stable. Store sales would last for a week or whatever. The others prices would change every second with exchange rates.
For a similar store in the Eurozone, the price in euros would be relatively stable, the others would fluctuate.
In the US, no one would be walking around with euros and gold bullion even if prices were displayed in dollars, euros, and gold. People would adjust to exchange rates and make mental conversions.
Simply put, the pricing unit is irrelevant.
Holding Unit
It’s the holding unit that matters, not the pricing unit.
If every country suddenly decided to hold gold and not dollars, that certainly would matter. But that can happen right now, regardless of the pricing unit.
If Saudi Arabia wants to hold gold, euros, or yen it can do so right now. A quote in dollars is irrelevant.
As a side note, someone must hold every dollar that’s printed. But if the desire to hold gold rose, then the price of gold in dollars would rise. That’s what matters, not multiple simultaneous prices.
Meanwhile, if Iran and Russia launch a stablecoin backed by gold, are you buying any?
Neither am I.
This is a political stunt, symbolic, yet meaningless due to lack of trust.
This post originated at MishTalk.Com
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Image and article originally from mishtalk.com. Read the original article here.