Gold-Backed Tokens Challenge Traditional ETFs as Global Tensions Fuel Safe-Haven Demand

Tokenized gold products like PAXG and XAUT see record volumes amid $3,480/oz gold prices, with the World Gold Council reporting 84 tonnes held in digital formats. BlackRock CEO Larry Fink highlights institutional interest in hybrid assets bridging commodities and DeFi.

PAXG trading volume surged to $98 million on June 19 following Coinbase’s DeFi lending integration, as investors flock to tokenized alternatives offering 24/7 liquidity and cross-chain collateralization – a 35% year-to-date increase in digital gold reserves reported by the World Gold Council.

Digital Gold Rush Accelerates

Tokenized gold products held $15.2 billion in assets globally as of June 20, according to CoinGecko data, with weekly trading volumes up 32% since the Bank for International Settlements (BIS) proposed new auditing standards for commodity-backed tokens. The PAX Gold (PAXG) token now represents 43 tonnes of allocated London vault gold, equivalent to Switzerland’s national reserves.

DeFi Integration Drives Adoption

Coinbase’s June 18 integration of PAXG into its DeFi protocols enables users to borrow stablecoins against tokenized gold positions at 65% LTV ratios. Tether simultaneously expanded XAUT’s availability to Telegram’s 900 million users through TON blockchain integration, creating first mass-market access to gold-backed assets.

Regulatory Momentum Builds

The BIS June 20 framework proposal mandates weekly proof-of-reserve audits for issuers, addressing transparency concerns that plagued early commodity tokens. This follows the Monetary Authority of Singapore’s May 2024 ruling recognizing gold-backed tokens as qualified liquid assets for bank reserves.

Institutional Players Enter Market

BlackRock’s Larry Fink told CNBC on June 19 that ‘tokenization of real-world assets represents the next frontier for capital markets,’ with the firm’s blockchain division exploring gold-backed structured products. This comes as gold ETFs suffered $2.1 billion outflows last week (Reuters data), suggesting portfolio reallocation.

Historical Precedents and Market Implications

The current surge echoes Bitcoin’s 2021 rally when institutional adoption pushed prices to $69,000, though tokenized gold offers inherent inflation hedging absent in pure crypto assets. Similar transformations occurred in the 2010s when Alipay and WeChat Pay digitized $17 trillion in Chinese payments – a precursor to today’s asset tokenization wave.Gold’s digitization mirrors the 2004 ETF revolution that brought $220 billion into paper gold products. However, blockchain-based solutions eliminate custodial layers – PAXG’s 0.02% custody fee undercuts the 0.4% average for physical gold ETFs. Market analysts suggest this efficiency gain could redirect 15-20% of ETF flows to tokenized alternatives by 2025.

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