Tokenized gold: how the digital equivalent of a precious metal works

After the creation of the first cryptocurrency, Bitcoin, a huge variety of digital assets emerged. First, altcoins and memecoins entered the market. Then issuers came up with the idea of tokenizing traditional assets. That is how stablecoins backed by real currencies or other assets appeared.

One variety of stablecoin is tokenized gold. Issuers began launching tokenized gold because physical gold is the largest asset on the market, with a market capitalization exceeding $3.6 trillion as of March 2026.

At the same time, demand for tokenized gold is growing rapidly, and in terms of growth rates in 2025, it has already outpaced the physical asset. For example, over the past year alone, the market capitalization of tokenized gold XAUT has grown more than fourfold amid overall economic instability.

What is tokenized gold?

Tokenized gold is a stablecoin issued on a specific blockchain and tracking the price of an underlying asset. In other words, tokenized gold is bullion converted into digital currency in accordance with a standard on a specific blockchain, such as ERC-20 on Ethereum or BEP-20 on BNB Chain.

As a rule, tokenized gold is backed by a real asset at a 1:1 ratio, although issuers of such cryptocurrencies may also include other assets in their reserves, such as U.S. dollars and Treasury bonds. The reserves are held by the issuers themselves, who in this case act as custodians. This means that holders of tokenized gold can exchange their digital assets for real metal at any time in accordance with the terms of a particular issuer.

Each unit of tokenized gold usually corresponds to one troy ounce, or approximately 31.1 grams of the physical asset.

The issuance process for tokenized gold works as follows:

1. The issuer deploys a special cryptocurrency smart contract on a blockchain, for example Ethereum;
2. As the reserve of physical gold grows, the issuer mints an equivalent amount of cryptocurrency on the selected blockchain. The same smart contract ensures that tokenized gold remains pegged to the price of the real asset, while the reserves undergo regular audits, usually at least once a month;
3. If the issuer removes a certain amount of the underlying asset from reserves, it burns an equivalent amount of tokenized gold using a special function.

The cryptocurrency itself is listed on centralized and decentralized exchanges, making it available for 24/7 trading to a wide range of crypto investors.

Advantages of tokenized gold

Fractional ownership

With traditional assets, investors can either purchase physical bullion in full or buy a lot* on an exchange or through a bank. One lot may correspond to one troy ounce or another amount, depending on the broker or bank.

* A lot is a standard unit of asset volume established by an exchange or financial platform that determines the minimum amount of an asset that can be bought or sold in a single transaction.

However, tokenized gold can be purchased in any fraction, down to one hundred-millionth of an ounce. As a result, investors can easily buy just one gram of gold or even less. This lowers the barrier to entry and makes tokenized gold accessible even to small investors who cannot afford to purchase a full ounce of metal at once.

Accessibility of tokenized gold

To trade on traditional and centralized exchanges, investors must complete identity verification procedures in accordance with regulatory requirements. In addition, exchanges, brokers, and banks may freeze assets in users' accounts or restrict access to them in the course of inspections, compliance procedures, suspected violations of platform rules, or at the request of government authorities. This reflects the high level of regulation and control in the traditional financial system.

In a decentralized environment, only a crypto wallet is needed to buy tokenized gold. It can be purchased anonymously on decentralized exchanges such as Uniswap or Curve.

Note: It should be taken into account that some tokenized assets and stablecoins are centralized. This means issuers can control such assets through smart contracts, for example by freezing assets in a wallet if its address is placed on sanctions lists.

Seamless transfers

Physical gold is heavy and expensive to transport, not to mention the need to ensure its security during shipment. Banks do provide such services, but they are always associated with paperwork and high costs, including insurance expenses.

When transferring digital gold between accounts at different banks, problems may also arise due to differences in institutional procedures. In some cases, this may not be possible at all. Moreover, it is often impossible even to transfer gold between accounts within the same bank or exchange it for other metals.

Tokenized gold, by contrast, can be transferred without restrictions to any wallet or exchanged for other digital assets through a decentralized exchange without signing any documents.

Simple and secure storage of tokenized gold

Storing physical gold requires a safe; without one, holding gold is unsafe. Digital gold is stored in unallocated accounts controlled by issuers, which requires investors to trust third parties.

Tokenized gold, like any other digital asset, can be stored by users in personal wallets whose keys are controlled only by them. This provides a significantly higher level of security, provided the keys have not been compromised.

Transparency of tokenized gold

Blockchain technology makes it possible to track all movements of tokenized gold, whereas clients of traditional companies do not have access to such information.

Integration with the decentralized finance (DeFi) market

Tokenized gold gives investors access to a wide range of financial services in decentralized markets, including lending, liquidity mining, yield farming, and digital asset trading. In turn, this creates additional passive income opportunities for holders of tokenized gold.

Disadvantages of tokenized gold

Despite a number of significant advantages related to convenience, speed, and accessibility of investment, tokenized gold also has its drawbacks.

Counterparty risk

Holders of tokenized gold are fully dependent on the issuer, who may both freeze assets unilaterally and falsify reserve documents if there is no external oversight.

In that case, investors risk being left with "empty shells" in their wallets that cannot be withdrawn or spent.

Low liquidity of tokenized gold

Despite its relatively large capitalization, the liquidity of tokenized gold on individual platforms is fairly low, especially compared with traditional platforms. For example, on the decentralized exchange Uniswap, the liquidity of tokenized gold amounts to just over $10 million, so in the event of large sales, the price may deviate significantly from that of the real asset.

Regulatory uncertainty

The tokenized gold market is still weakly regulated, which slows the inflow of capital from large, including institutional, investors and does little to support growth in the liquidity of the digital asset.

What tokenized gold has already been issued

As of March 2026, there are only two liquid tokenized gold assets on the crypto market: Tether Gold (XAUT) and PAX Gold (PAXG). In total, according to CoinMarketCap, there are dozens of such cryptocurrencies.

Tether Gold (XAUT)

XAUT is the largest tokenized gold asset on the crypto market: its market capitalization reaches $2.9 billion, and by this metric the stablecoin ranks among the top thirty digital assets.

Tokenized gold XAUT was issued by Tether, the issuer of the largest stablecoin, USDT. Tether Gold is available on many well-known trading platforms, including ByBit, OKX, Bitget, Uniswap, Gate.io, KeCoin, MEXC, and others.

PAX Gold (PAXG)

Tokenized gold PAX Gold is only slightly behind XAUT in terms of market capitalization: PAXG has a market cap of $2.5 billion. PAXG was issued by Paxos, a well-known issuer in the crypto industry, which has also launched such well-known stablecoins as:

• The now-inactive Binance USD (BUSD);
• Pax Dollar (USDP);
• PayPal USD (PYUSD);
• Global Dollar (USDG).