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Surety Bonds for ABSC
A surety bond can help increase the trustworthiness and transparency of a metals-backed stablecoin project by providing a financial guarantee that the issuer will fulfil its obligations to the token holders. For example, if the issuer claims to have a certain amount of gold in a vault, the surety bond can ensure that the gold is audited regularly and insured against theft or loss. If the issuer fails to comply with these requirements, the surety bond can compensate the token holders for their losses.
By using a surety bond, EMCO Network can obtain an investment grade rating from rating agencies such as Moody's, Standard & Poor's or Fitch. This rating reflects the credit quality and financial strength of the EMCO Network ABSC, and indicates its ability to meet its obligations to its token holders. A higher rating can lower the cost of capital, increase its market value and liquidity, and expand its potential customer base.
In a more broad context, the benefits of using a surety bond for a metal-backed stablecoin are:
- It increases the trustworthiness and transparency of the business, as it provides an independent verification of the gold reserves and their custody.
- It protects the token holders from losing their money in case of insolvency, theft or mismanagement by the team.
- It enhances the reputation and credibility of the business, as it demonstrates its commitment to comply with high standards of quality and performance.
- It may lower the regulatory barriers and compliance costs for the business, as it shows its willingness to cooperate with authorities and adhere to best practices.
- It may attract more investors and customers for the business, as it offers them more security and confidence in their investment, being investment grade and having a rating.
- It opens the possibilities to create several stablecoins under the same umbrella, like gold, other precious metals, a precious metals basket, diamonds, gemstones or any other liquid asset as long as the underwriter accepts it. This will open up many possibilities to develop several stablecoin business with investment grade ratings.
Besides surety bonds, there is an alternative pathway and that is to create a Bankable Security in a recognized market such as Switzerland and obtain a SWISS ISIN number for the security. In this way, institutional investors can access the stablecoin as an investment product, independently for the sureties provided to the token holders. In this manner, the stablecoins themselves will attract additional investment, turning that into more liquid assets and a higher stablecoin issuance.