What is Tokenized Gold?
Gold has traditionally been a reliable asset for capital protection, especially during economic instability. However, owning physical metal comes with several inconveniences: it requires secure storage, is difficult to transport, and the high cost of a whole bar limits access for many investors.
Integration with blockchain technology and the development of the real-world assets sector (RWA) offer a convenient solution. Tokenized gold is a digital representation of physical bars or coins. The popularity of this approach is rapidly increasing as such instruments combine the stability of precious metals with the absence of maintenance costs.
Technically, it involves a token that confirms ownership of real gold. These assets operate similarly to stablecoins, but their value is tied not to fiat currencies but to market prices of the metal.
Typically, one token is backed by a fixed weight of gold—such as one gram or one troy ounce. The physical reserves are stored in certified vaults under the supervision of custodians.
Issuing such assets on networks like Ethereum allows investors to freely transfer them, trade on exchanges, and use them in DeFi protocols alongside traditional cryptocurrencies.
How is Gold Tokenization Processed?
The gold tokenization process typically involves three stages:
Storage
The issuer purchases physical metal (bars or coins) and stores it in a secure and insured vault. This approach ensures that future tokens are backed by real assets.
Issuance
Using smart contracts, the company issues coins on the blockchain. Their market supply must strictly correspond to the actual reserves—for example, 100 tokens for 100 ounces of gold.
Audit
To confirm reliability, projects engage independent auditors. Specialists verify that the volume of assets in the vault matches the number of coins in circulation. Some projects also implement oracles like Chainlink to publish proof of reserves, ensuring data transparency.
Users can freely sell tokens on exchanges or convert them back into physical metal through the issuer's platform, paying applicable fees. In a direct exchange, the digital asset is burned and thus removed from circulation—this is necessary to maintain a 1:1 backing ratio.
What are the Advantages of Tokenized Gold?
Let's examine the key properties and factors that make this relatively new asset attractive.
Accessibility and Fractionalization
Physical gold bars cost thousands of dollars, limiting the pool of buyers. Tokenization solves this problem by allowing the purchase of assets in micro-doses (for example, 0.01 tokens). This means that virtually any smartphone owner can invest in gold.
24/7 Liquidity
Traditional metal markets are tied to business hours, and transaction settlements can take several days. Tokenized assets trade on crypto exchanges without breaks, and all buy-sell operations occur almost instantly, 24/7.
Transparency and Security
Blockchain guarantees the immutability of ownership data. Combined with regular audits and the Proof-of-Reserves mechanism, it is much easier for investors to verify the actual backing of the token compared to dealing with "paper gold" instruments.
Integration with DeFi
Unlike bars stored in vaults, tokenized metal can be used as working capital. The asset is well-suited for liquidity pools or as collateral for loans in DeFi protocols—this "financial Lego" opens up a wide range of use cases.
What are the Pitfalls of Tokenized Gold?
Despite the aforementioned advantages, investing in tokenized gold comes with several risks that are important to consider:
Regulatory Uncertainty
The legal framework for RWA assets and stablecoins is still being developed. Potential changes in laws could complicate the issuance or trading of such instruments.
Custodial Risks
Unlike Bitcoin, whose architecture eliminates the need to trust third parties (trustless), tokenized gold directly depends on the issuing company. Investors must trust that the platform genuinely stores the metal and will ensure its redemption. Bankruptcy of the organization or mismanagement of reserves could lead to the token's devaluation.
Low Liquidity
Despite the sector's growth, liquidity for tokenized gold on crypto exchanges still significantly lags behind that of the traditional spot metal market.
Costs and Fees
Trading strategies must account for network fees for blockchain transactions, as well as possible issuer fees for storing physical backing and managing reserves.
Who are the Leaders in the Tokenized Gold Segment?
Two major projects hold strong positions in the tokenized gold segment:
Tether Gold (XAUT)
The issuer of the asset is the creator of the stablecoin USDT. Each token is pegged to the price of one troy ounce in Good Delivery bars. Physical reserves are held in Swiss vaults.
As of February 26, 2026, the market capitalization of XAUT exceeds $3.6 billion; tokens are backed by 1,804 gold bars weighing over 22 tons. Source: Tether Gold website.At the end of January, XAUT entered the top 10 perpetual futures pairs on the Binance exchange.
Trading volume dynamics of XAUT and its positions in the ranking of perpetual futures on Binance. Source: CryptoQuant.“Gold-backed tokens have ceased to be a niche hedging instrument. They now directly compete with leading crypto derivatives,” noted CryptoQuant researcher known as maartunn.
Paxos Gold (PAXG)
The issuer is Paxos Trust, which is regulated by the New York state authorities. The price of one token is tied to one ounce of physical gold from LBMA London vaults.
Tether Gold and Paxos Gold are the two clear leaders in the tokenized gold segment. Each project's capitalization exceeds $2 billion, leaving competitors far behind. Source: CoinGecko as of February 26, 2026.XAUT and PAXG dominate the entire tokenized asset segment. Their closest competitor by capitalization is JWMH from the Justoken project, a digital asset "backed by megawatt-hours of electricity".
Dynamics of capitalization of various tokenized exchange-traded goods. Source: RWA.The lion's share of RWA token value is concentrated on Ethereum:
Most popular blockchains used for issuing tokenized exchange-traded goods. Source: RWA.What are the Prospects for the Tokenized Precious Metals Segment?
Interest in RWA assets is growing amid macroeconomic instability and the gradual removal of regulatory uncertainty in the US and other jurisdictions.
The development of infrastructure and the emergence of convenient trading tools are also contributing to the influx of capital into the segment, including through retail investor engagement.
In February, the Kraken exchange launched 24/7 trading of perpetual futures on tokenized assets: gold, indices, and tech giant stocks.
In the same month, Canadian Elemental Royalty Corporation became the first public company in the sector to offer shareholders the option to receive dividends in digital assets backed by gold. The firm uses XAUT for payments.
Institutional clients of market maker Wintermute recently gained access to instruments backed by physical gold. Settlements for over-the-counter transactions are available in cryptocurrencies, stablecoins, and fiat currencies.
On September 3, 2025, the World Gold Council (WGC) launched a pilot project for gold tokenization. The initiative aims to expand OTC operations with gold and its use as collateral in financial markets.
In an interview with the Financial Times, WGC head David Tait emphasized that the new format will allow market participants to transfer assets digitally within the ecosystem to secure obligations for the first time.
This step accelerates the digitization of the traditional reserve asset. Interest in the technology is growing amid discussions about the potential monetization of the Fed's reserves, opening up new scenarios for the use of precious metals.