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FAQ – Institutional Version

Physical Gold Custody

  1. Where is the gold underlying XAUm held and by whom?

The physical gold backing XAUm tokens is securely stored in vaults located in Singapore and Hong Kong. These vaults are managed by Brink’s, global leader in secure logistics and asset protection.

Official press release can be found here.

  1. Why Brink’s and Malca Amit?

Matrixdock partners with Brink’s, one of four security carriers officially recognized and approved by LBMA, for physical custody of gold underlying XAUm. To enhance risk mitigation and ensure operational redundancy, Matrixdock is also in discussions with Malca Amit as a backup provider.

You can find the official LBMA member list here. Both Brink’s and Malca Amit operate high-quality vaults worldwide, which supports XAUm’s potential for expanding redemption locations in the future.

The sections below delve into the background of Brink’s and Malca Amit, focusing on two key aspects: (1) their security credentials and (2) their commitment to asset transparency within the LBMA ecosystem. LBMA’s industry-leading management practices not only bolster asset value but also ensure liquidity and protection of value during liquidation scenarios.

Brink’s

The Brink’s Company, founded in 1859, is a global leader in secure logistics and cash management services. Brink’s operates in over 100 countries, providing services such as secure transportation, ATM services, and vaulting. The company is publicly traded on the New York Stock Exchange under the ticker symbol BCO.

Brink’s has a long-standing reputation for reliability and security, serving a diverse clientele that includes financial institutions, retailers, government agencies, and jewellers. Its extensive experience and global presence underscore its commitment to safeguarding valuable assets worldwide.

Security Credentials

Brink’s adheres to rigorous security protocols and global industry standards, supported by certifications such as:

  • ISO 9001:2015

  • ISO 14001:2015

  • ISO 45001:2018

Security certifications for Brink's in Hong Kong and Singapore are not publicly shared and specific certifications may vary by region.

Industry Memberships

Brink’s is a full member of London Bullion Market Association (LBMA) and Singapore Bullion Market Association (SBMA). The memberships underscore the Group's commitment to industry standards and active participation in developing the global bullion market.

Learn more about Brink’s here.

Malca Amit

Malca Amit, established in 1963, is a premier provider of secure logistics and storage solutions for high-value assets, including diamonds, jewelry, precious metals, and fine art. Operating across a global network, Malca-Amit offers services such as secure transportation, customs brokerage, vaulting facilities, and specialized operations.

Security Credentials

Malca Amit is committed to maintaining the highest standards of security and quality, notable certifications include:

  • ISO 9001

  • ISO 27001

These certifications affirm the company’s dedication to operational excellence and the safeguarding of client information.

Industry Memberships

Malca-Amit is a full member of the London Bullion Market Association (LBMA), reflecting its adherence to the highest standards in the global bullion market. Additionally, the company’s facilities are authorized by members of the London Clearing Company and have LBMA approval for the weighing and inspecting of precious metals.

For more information about Malca-Amit’s services and global network, please visit their official website.

  1. What is the relationship between Matrixdock and Brink’s?

Matrixdock has established a strategic partnership with Brink’s to handle the secure transportation and vaulting of the gold that underpins XAUm tokens.

  1. Are there insurance policies covering the vaulted gold?

Brink’s provides comprehensive insurance coverage for gold stored in their vaults, protecting against risks such as theft, damage, or loss.

As of Nov 29 2024, the insurance provides coverage up to US$50M.

  1. How can investors verify the gold backing XAUm?

Matrixdock ensures transparency through monthly asset statements and LBMA refinery invoices, verifying the existence and authenticity of the gold reserves backing XAUm tokens. Additionally, Matrixdock partners with Bureau Veritas to perform quarterly audits, confirming both the quantity and quality of the reserves.

All relevant data is recorded publicly on the Ethereum blockchain, providing investors with additional transparency and full immutability, enabling independent verification of their digital asset backing.

Matrixdock also offers management of sub-accounts for customers with substantial XAUm holdings, provided they meet identity verification standards. This service includes the option for on-site inspections and asset verification to ensure transparency and trust.

  1. If key counterparties face a major crisis leading to bankruptcy, how would Matrixdock handle the situation?

Matrixdock has implemented multiple bankruptcy safeguards in XAUm, ensuring investor trust and protection in minting, holding, and redeeming the token.

Protection from Matrixport bankruptcy

Following STBT’s innovative bankruptcy-remote design, XAUm is also issued under a special purpose trust model. This separates the token issuer from asset custodianship, protecting gold assets from creditor claims in the event of Matrixdock’s insolvency. Matrixdock works with Appleby Global Services (trustee) and Hamilton Services (enforcer), renowned independent trust service providers, to ensure that the trust is maintained and operates as intended.

Protection from Gold Custodian bankruptcy

Matrixdock’s gold custodians (Brink’s and Malca Amit) also store assets under trust structures, meaning the gold remains outside of the custodian’s assets and is protected from creditors in the event of the custodian’s bankruptcy.

In the unlikely event whereby, the custodian is unable to perform its material obligations pursuant to the terms of the storage agreement, the custodian shall promptly arrange for the return and delivery of all underlying gold in accordance with Matrixdock’s instructions.

Geographical diversification

Matrixdock gold collaborates with multiple LBMA-accredited vault providers, such as Brink’s and Malca Amit, across different locations (Singapore and HK), mitigating exposure to any single institution.

Temporary issuance suspension

In the extreme circumstances where operations are halted, Matrixdock will temporarily suspend new XAUm issuance until the gold is safely transferred to a new custodian. During this period, Matrixdock commits to facilitate customer redemptions on a best effort basis.

  1. How does XAUm handle liquidity risks in large-scale transactions?

XAUm ensures seamless large scale redemptions during market volatility through robust operational practices and strategic partnerships. Matrixdock addresses liquidity risks with the following measures:

  1. LBMA-Backed Reserves: XAUm is fully backed by LBMA-accredited gold, ensuring high liquidity and global acceptance even during market turbulence. Regular Proof of Reserves guarantees 1:1 backing, reinforcing trust and transparency.

  2. Authorized Redemption Channels: Matrixdock partners with a diverse network of LBMA-compliant refineries and brokers to facilitate redemptions. These partnerships ensure a continuous market for XAUm, with sufficient physical gold to meet all redemption demands.

  3. Trusted Vaulting Partners: XAUm’s reserves are stored with leading vaulting providers, equipped to handle high redemption volumes and scale operations during periods of increased demand.

  4. Clear Redemption Mechanisms: Transparent and predefined processes, including minimum thresholds, streamline redemptions, providing investors with confidence and predictability during volatile periods.

By combining trusted infrastructure and global partnerships, Matrixdock ensures XAUm redemptions remain secure, efficient, and reliable, protecting investor interests and upholding market stability.

Collateral and Lending

  1. How can XAUm be used as collateral for stablecoin borrowing?

XAUm can be pledged on partnered lending platforms as collateral to access stablecoin liquidity. The gold-backed nature of XAUm ensures its stability, making it an attractive asset for large volume borrowing. Borrowed stablecoins can then be redeployed into various strategies, preserving exposure to gold while generating additional returns.

  1. What are the typical LTV (Loan-to-Value) ratios offered for XAUm collateral?

Depending on the lending platform, XAUm LTV ratios range can from 70-93%. This is in line if not higher than the most liquid crypto assets and stablecoins ie ETH, (W)BTC, USDT and USDC.

  1. Which platforms or protocols currently accept XAUm as collateral?

XAUm can be used as collateral at the following venues:

  1. What are the DeFi risks associated with using XAUm for stablecoin loans and how are they mitigated?

The use of XAUm as stablecoin collateral in DeFi introduces five primary categories of risk. Matrixdock has implemented robust mitigation measures to address these risks and ensure the security and stability of XAUm.

  1. Platform counterparty risk

Platform counterparty risk arises from potential failures of DeFi platforms managing XAUm collateral or loans, including insolvency, mismanagement of funds, or fraudulent activity.

Mitigation measures:

  • On-Chain Transparency: XAUm transactions and reserves are fully verifiable on-chain, supported by monthly asset attestations to ensure integrity and trust.

  • Smart Contract Security Reviews: All XAUm deployments are rigorously reviewed by Matrixport’s blockchain security team to ensure comprehensive risk assessment and adherence to best practices.

  • Time-Tested Partnerships: Matrixdock partners exclusively with established and reputable DeFi lending platforms, focusing on those with proven operational reliability and long-term community trust.

  1. Smart contract risk

Smart contract risk arises from potential bugs, vulnerabilities, or exploits in the code managing XAUm’s lending and collateralization processes.

Mitigation measures:

  • Extensive audits: All XAUm-related contracts are subject to rigorous audits by leading blockchain security firms before liquidity provisioning.

  • Modular design: Contracts are designed with isolated functionalities (e.g., token, NFT, messaging) to minimize systemic impact in the event of a failure.

  1. Oracle risk

Oracle risk occurs when the data feed providing XAUm’s NAV or price information is compromised or inaccurate, leading to incorrect collateral valuations or liquidations.

Mitigation measures:

  • Chainlink Price Feed: Matrixdock leverages Chainlink’s decentralized and trusted XAU/USD feed to ensure accurate, tamper proof data.

  • Backup Oracle by Matrixdock: A dedicated backup oracle, hosted by Matrixdock, provides redundancy to support reliable data availability and ensure seamless 24/7 liquidation operations.

  1. Network risk

Network risks involve delays or disruptions caused by blockchain congestion, downtime, or vulnerabilities in cross-chain bridge mechanisms for XAUm.

Mitigation measures:

  • Proven blockchains: XAUm is deployed exclusively on blockchains with proven security, liquidity, and user track records, such as BNB Chain.

  • Chainlink CCIP: Matrixdock leverages Chainlink’s Cross-Chain Interoperability Protocol (CCIP) to ensure secure and reliable cross-chain transfers.

  1. Market risk

Market risks arise from fluctuations in XAUm’s value, driven by changes in gold prices or reduced liquidity during extreme market conditions. Users can collateralize their assets and apply leverage according to their preferences. While gold generally provides greater stability compared to crypto assets, adopting aggressive strategies can heighten risks.

Mitigation measures:

  • Overcollateralization: All loans collateralized with XAUm are over-collateralized, providing a buffer against price volatility.

  • 1:1 LBMA gold backed: XAUm is fully backed by LBMA-accredited gold reserves, ensuring a stable and reliable mechanism for liquidation.

Yield Generation and Arbitrage

  1. What yields can users expect from arbitrage opportunities involving XAUm?

Yields depend on market conditions and strategy execution but typically range from 5% to 20% APR for stablecoin positions (3-15% on XAUm). Users employing sophisticated strategies can achieve higher returns, particularly in periods of bullish market sentiment.

  1. What are potential strategies for generating returns with XAUm?

Users can use stablecoins borrowed against XAUm for arbitrage opportunities across CEXs and DEXs, as well as staking opportunities across DeFi protocols. Examples include:

Interest Rate Differentials: Borrow at low rates on XAUm-backed loans and lend stablecoins at higher rates across CeFi or DeFi platforms.

Example: Borrow at 10-15% and deposit at OKX Flexi-Earn products (APR 30% as of Nov 29)

Yield Farming and Liquidity Provision: Deploy stablecoins into DeFi protocols offering rewards for liquidity contributions.

Example: Provide USDT/USDC to farm sUSDe rewards at Ethena (APR 25% as of Nov 29)

Stablecoin Arbitrage: Borrow stablecoins against XAUm and trade across exchanges where pricing inefficiencies exist, especially in volatile markets.

Example: Borrow USDT and sell at regional CEXes with peg variances ie Upbit.

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