Asset-backed tokens have long offered significant promise to transform the world of finance and investing. 24/7 trading, instant settlement, and fractionalization are just a few of the benefits offered when assets are recreated as cryptocurrencies on a blockchain. From the perspective of the cryptocurrency investor, tokens backed by real-world assets may also offer an opportunity to hedge a portfolio against some of crypto’s notorious volatility, which has once again been in evidence over recent weeks.
The traditional hedging instrument of choice, gold, is ripe for tokenization. Owning physical gold comes with issues such as storage and security, not to mention that it’s a relatively illiquid asset. Instruments such as ETFs may not offer the same direct exposure to gold prices. In contrast, gold-backed tokens are directly linked to gold prices and provide a fast and easy way to buy and sell gold, introducing new liquidity to the markets.
Over recent years, several firms have attempted to launch a version of tokenized gold; however, there has been an absence of operators from within the gold sector itself. Now, Asia Broadband, Inc. (OTC: AABB), a resource company focused on the production, supply, and sale of precious and base metals, has released its own gold-backed token.
For the 25-year-old US firm, it’s the first foray into the world of digital assets. And for the cryptocurrency space, it’s the first time an established player has emerged with a vertically integrated “Mine-to-Token” concept.
About Asia Broadband and AABBG
Asia Broadband was established in 1996, producing and supplying precious and base metals from Mexico to clients based in Asia. It’s now a US-listed company, delivering value to shareholders through its vertical integration approach to its value chain. In 2020, the company achieved an all-time high annual gross profit of $16.8 million, and over $100 million in assets for its first quarter of 2021.
The shift into cryptocurrency has come about thanks to the direction of the company’s president, CEO, COO, and Director, Chris Torres. Despite being a long-established business and finance leader, he has an aptitude for technology and possesses extensive knowledge of cryptocurrency investing. As a result, Asia Broadband has now released the AABB Gold (AABBG) token.
The company believes there’s a significant market for investors interested in owning cryptocurrencies as a digital store of value but who are likely to be put off by the inherent volatility in the crypto markets.
AABBG is backed by the gold mines owned and operated by Asia Broadband, along with $30 million in physical gold reserves. The company has made a public pledge to back 100% AABBG by gold reserves, supplied uniquely by its own mining operations, with third-party sources used only as a backup.
This vertically integrated “mine-to-token” concept is completely unique. Investors can benefit from knowing that they’re dealing with an established, US-listed firm and gain exposure to gold without any of the existing challenges.
Price and Demand
The minimum token price is pegged to the current spot price of gold, which means the token benefits from the lower volatility of gold relative to the cryptocurrency space, offering a sense of stability. Given fears of devalued fiat currencies, the bull case for gold remains intact, and AABBG could also rise as a function of increasing gold prices. As the price of gold fluctuates, the floor for AABBG tokens can change, but the potential upside price of the token will be driven by market demand.
It’s also worth noting that Asia Broadband’s experience and network in the gold sector also offer significant potential to drive demand. As the company has put extensive focus on the vertical integration of its own sales network in Asia, these global relationships provide the potential for cross-selling and deeper liquidity.
AABBG launched in March and, within two weeks, had sold $1 million worth of tokens. It’s now developing a proprietary exchange to allow AABBG holders to trade their tokens for various cryptocurrencies.
The entry of established professional firms to the asset-backed token sector could be just what it needs to get kick-started. With industry expertise, global networks in the business, and innovative business models, it’s evident that they’d have plenty to bring to the table.
Image by Daniel Dino-Slofer from Pixabay