Tether CEO Warns Paper Gold Era Could End “Gradually, Then Suddenly”

Tether CEO Paolo Ardoino hinted Friday that the era of “paper gold” may be nearing its breaking point, posting a cryptic but pointed remark.

“Gradually, then suddenly," Ardoino posted on Twitter, referencing a study by Blockchain Research Lab, which warns that the leveraged paper gold system could face a nonlinear collapse.

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Ardoino's message, more than just an Ernest Hemingway nod, implies that the tokenized gold market could replace paper gold in the future. 

The study, published earlier this week, argues that the global gold market rests on a fragile leveraged structure, where futures contracts and unallocated accounts vastly outweigh the amount of physical gold available.

We previously reported that central banks all around the world have been increasing their gold treasuries. At the same time, demand for U.S. debt has weakened — a void Tether itself has begun to fill.

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Tether itself has also become a major player in the gold market. In recent quarters, the company has purchased more than 100 tonnes of bullion to back its tokenised product, Tether Gold (XAUt), making it one of the largest private holders of gold globally.

The Blockchain Research Lab argues that we could experience a shift in the way investors gain exposure to gold in the future. Paper gold, being the dominant instrument today, relies on futures contracts and unallocated accounts that are only loosely tied to physical reserves. This leveraged structure has worked for decades because most investors never demanded delivery, but the study warns that confidence in such claims is eroding.

In contrast, tokenized gold products like Tether's (XAUt) are fully backed by the real thing. And when considering the ease of accessing the tokenized assets market, and how adoption will only increase in the coming years, tokenized reserves could gradually displace paper contracts.