What Is Gold Tokenization? How Physical Bullion Goes Digital
What Is Gold Tokenization?
Gold tokenization is the process of converting physical gold bullion into digital tokens on a blockchain, where each token represents a verified claim on a specific quantity of vaulted, LBMA-certified gold. These tokens can be bought, sold, and transferred around the clock without moving the underlying metal. The tokenized gold market exceeded $6 billion in market capitalization by early 2026 (CoinGecko), driven by institutional demand for fractional, liquid exposure to physical bullion.
Contents
- How Does Gold Tokenization Work?
- Gold Tokenization Market Size and Growth
- Types of Tokenized Gold Products
- LBMA Standards and Why They Matter
- Tokenized Gold vs Physical Gold vs Gold ETFs
- Benefits of Tokenized Gold for Institutional Investors
- Risks and Considerations
- How to Access Tokenized Gold Through Aerapass
- Frequently Asked Questions
How Does Gold Tokenization Work?
Gold tokenization follows a three-step process that creates a verifiable chain of custody from physical metal to digital asset. Each step introduces specific standards and counterparties that determine the reliability of the final token. A token is only as good as the gold behind it and the infrastructure securing it.
Step 1 - Physical Gold Acquisition and Vaulting
The process begins with acquiring physical gold that meets London Bullion Market Association (LBMA) Good Delivery standards. This means bars refined by LBMA-accredited refiners such as Heraeus, Valcambi, or PAMP, weighing approximately 400 troy ounces (12.4 kg) with a minimum fineness of 995.0 parts per thousand (LBMA Good Delivery Rules).
Custody providers such as Brink’s, Malca-Amit, and Le Freeport Singapore receive and store the gold in secure, audited vaults. Staff individually serialize, weigh, and assay each bar, maintaining records for on-chain reference. Vault operators conduct regular physical audits - typically quarterly - with independent assurance firms verifying the results. These audits confirm that the quantity of vaulted gold matches or exceeds the number of tokens in circulation.
Step 2 - Digital Token Issuance
Once the vault confirms gold receipt and verification, the issuer mints digital tokens on a blockchain. Each token represents a defined quantity of gold, commonly one troy ounce, though fractional units are available on some platforms.
The issuer publishes a smart contract that governs token creation, transfer, and destruction. This contract typically includes:
- Proof of reserves - on-chain attestations linking token supply to vault holdings
- Transfer rules - compliance checks such as KYC/AML verification before transfers
- Burn mechanics - when tokens are redeemed for physical gold, the corresponding tokens are permanently destroyed
Most tokenized gold products operate on Ethereum (ERC-20) or Tron (TRC-20) networks, though multi-chain deployment is increasingly common.
Step 3 - Trading and Redemption
Token holders can trade their gold tokens 24/7 on supported exchanges and platforms. Unlike traditional gold markets, which operate during specific exchange hours, tokenized gold settles in minutes rather than the T+2 standard for physical bullion trades.
Redemption works in reverse: a holder submits tokens for burning and arranges physical delivery of the equivalent gold. PAXG holders can redeem for LBMA-certified bars through Paxos’s London vault network. XAUT offers delivery to any address in Switzerland. Minimum redemption thresholds apply - typically one full bar (approximately 400 oz) for physical delivery, though some platforms offer smaller cash-equivalent redemptions.
For most institutional holders, the trading and lending utility of tokens exceeds the value of physical redemption, making the tokenized form the preferred holding structure.
Gold Tokenization Market Size and Growth
The tokenized gold market reached $6.2 billion in market capitalization by February 2026, with cumulative trading volume exceeding $178 billion during 2025 (CoinGecko). Two products dominate: Tether Gold (XAUT) at $3.57 billion and Paxos Gold (PAXG) at $2.31 billion, together accounting for approximately 97% of the sector’s total capitalization. These tokens are collectively backed by more than 1.2 million troy ounces of LBMA-certified gold held in vaults across London, Zurich, and Singapore.
This growth reflects broader institutional momentum behind gold as a reserve asset. Central banks purchased 1,045 tonnes of gold in 2024 and 863 tonnes in 2025 (World Gold Council, Central Bank Gold Reserves Survey), sustaining a multi-year accumulation trend. With gold trading between $4,200 and $5,600 per troy ounce during the first half of 2026, the barrier to entry for full-bar ownership - approximately $1.7-2.2 million per 400 oz bar - has pushed institutional allocators toward fractional and tokenized alternatives.
Industry projections estimate the global market for tokenized real-world assets, including gold, could exceed $16 trillion by 2030 (Boston Consulting Group/ADDX, 2022). Gold’s established custody infrastructure, standardized grading through LBMA, and deep liquidity make it among the most natural candidates for tokenization within the broader real-world asset movement.
Types of Tokenized Gold Products
Not all tokenized gold products offer the same quality of backing, regulatory oversight, or redemption options. The differences matter for institutions conducting due diligence on behalf of clients.
| Feature | XAUT (Tether Gold) | PAXG (Paxos Gold) | Aerapass Fractional Gold |
|---|---|---|---|
| Issuer | TG Commodities Ltd. | Paxos Trust Company | Aerapass |
| Backing | LBMA Good Delivery | LBMA Good Delivery | LBMA Good Delivery (Heraeus) |
| Denomination | 1 troy oz per token | 1 troy oz per token | Fractional (from $10) |
| Blockchain | Ethereum, Tron | Ethereum, Solana | Platform-native |
| Custody | Switzerland | London (Brink’s) | Le Freeport, Singapore |
| Regulatory Status | BVI-registered | NYDFS-regulated trust | MAS-licensed |
| Redemption | Physical (Switzerland) | Physical (London) | Cash equivalent |
| Audit Frequency | Quarterly (BDO) | Monthly (KPMG) | Independent quarterly audit |
| Min. Purchase | Price of 1 oz (~$4,200-5,600) | ~$42-56 (0.01 PAXG) | $10 |
Source: Tether, Paxos, and Aerapass public disclosures (Q1 2026)
XAUT and PAXG serve crypto-native holders who want gold exposure within their existing wallet infrastructure. Aerapass serves wealth managers and financial institutions seeking regulated, multi-asset trading infrastructure with precious metals as one component of a broader offering.
LBMA Standards and Why They Matter
The London Bullion Market Association sets the global benchmark for precious metals quality and trading practices. LBMA Good Delivery accreditation is the minimum standard institutional buyers should require for any gold-backed product - tokenized or otherwise.
Good Delivery bars must meet three criteria:
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Refiner accreditation. The bar must be produced by an LBMA-accredited refiner. As of 2026, more than 60 refiners hold active Good Delivery accreditation for gold (LBMA Accredited Refiners List). Heraeus, Valcambi, Argor-Heraeus, and PAMP are among the most widely recognized.
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Purity standard. Minimum fineness of 995.0 parts per thousand (99.50% pure gold). Most accredited refiners routinely exceed this, producing bars at 999.9 fineness.
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Weight and marking. Bars must weigh between 350 and 430 troy ounces, with each bar stamped with the refiner’s assay mark, serial number, year of manufacture, and fineness.
LBMA accreditation establishes fungibility: any Good Delivery bar can be substituted for any other in settlement. This is the foundation of the London gold market’s $30+ billion in daily clearing volume (LBMA Market Data). Tokens backed by non-LBMA gold cannot access this liquidity infrastructure, limiting their institutional utility.
For tokenized gold specifically, LBMA backing means the physical gold underlying each token meets the same standard used by central banks, sovereign wealth funds, and major bullion banks. This is not a marketing distinction. It is the difference between institutional-grade and retail-grade product.
Tokenized Gold vs Physical Gold vs Gold ETFs
Each form of gold exposure serves different investor needs. The choice depends on trading frequency, custody preferences, minimum investment thresholds, and regulatory considerations.
| Feature | Tokenized Gold | Physical Bullion | Gold ETFs (GLD, IAU) |
|---|---|---|---|
| Ownership type | Direct claim on allocated gold | Direct physical possession | Shares in a trust holding gold |
| Trading hours | 24/7/365 | Exchange hours or OTC | Exchange hours (Mon-Fri) |
| Minimum investment | From $10 via Aerapass | Price of 1 oz (~$4,200-5,600) | ~$200-300 (1 share) |
| Annual holding cost | 0-0.25% (varies by issuer) | Storage + insurance (0.5-1.5%) | Expense ratio (0.25-0.40%) |
| Settlement speed | Minutes (on-chain) | T+2 (London market) | T+1 (equity settlement) |
| Physical redemption | Yes (minimum thresholds apply) | Already physical | Authorized participants only |
| Fractional divisibility | Up to 18 decimal places | Bars and coins only | Per-share only |
| Counterparty risk | Issuer + custodian | Vault operator (if stored) | Trust sponsor + custodian |
| Collateral use | DeFi lending, platform borrowing | Limited (delivery required) | Margin lending via broker |
| Regulation | Varies by jurisdiction | Physical commodity (minimal) | SEC-regulated securities |
Source: Author analysis based on disclosures from Paxos, Tether, SPDR, iShares, and LBMA
Tokenized gold offers the strongest combination of accessibility, divisibility, and trading availability. Physical gold remains preferred for holders who prioritize direct possession and minimal counterparty exposure. ETFs suit investors who want gold exposure through traditional brokerage accounts without managing custody.
To put accessibility in perspective: Singapore’s major banks require between S$54 (OCBC Precious Metals Account, 0.01 oz minimum) and S$873 (UOB Gold Savings Account, 5g minimum) to start investing in gold. Gold ETFs require approximately S$300 for a single share. Tokenized and fractionalised bullion through platforms like Aerapass reduces this barrier to $10 - making institutional-grade, LBMA-certified gold accessible to a far broader range of portfolio allocations. (S$ estimates based on gold price of approximately US$4,225/oz as at June 2026.)
For institutional allocators managing client portfolios across multiple asset classes, tokenized gold integrates into digital asset infrastructure without requiring separate custody arrangements for physical metal.
Benefits of Tokenized Gold for Institutional Investors
Tokenized gold addresses several structural limitations of traditional gold investment that are particularly relevant to wealth managers and financial institutions.
Fractional access at institutional grade. A single LBMA Good Delivery bar costs approximately $1.7-2.2 million at 2026 prices. Even Singapore’s most accessible bank offering - OCBC’s Precious Metals Account - requires a minimum of 0.01 oz (approximately S$54 as at June 2026). Aerapass’s Fractionalised Bullion Ownership reduces this to $10 for investment-grade gold, silver, and platinum, while maintaining the same LBMA backing that underlies central bank reserves. For wealth managers building diversified client portfolios, this means precious metals allocation is no longer gated by minimum purchase thresholds.
24/7 liquidity. Traditional gold markets operate during London, New York, and Asian exchange hours with T+2 settlement. Tokenized gold trades and settles continuously. For multi-timezone operations serving clients across Asia, Europe, and the Americas, this eliminates the timing friction that characterizes physical gold trading.
Programmable compliance. Smart contracts can embed KYC/AML checks, transfer restrictions, and reporting triggers directly into the token. This reduces operational overhead for compliance teams managing cross-border gold exposure across multiple regulatory jurisdictions.
Portfolio integration. Tokenized gold sits on the same infrastructure as other digital assets, enabling unified portfolio reporting, rebalancing, and risk management. Wealth managers can adjust gold allocations in real time alongside FX, equities, and crypto positions without switching platforms or custody providers.
Transparent custody verification. On-chain proof of reserves enables continuous, auditable verification of backing. Unlike ETFs, where investors rely on periodic trustee reports, tokenized gold platforms can provide real-time supply and reserve data that clients can independently verify.
Risks and Considerations
Gold tokenization introduces risks that differ from those of physical gold or ETFs. A balanced assessment is essential for institutional due diligence.
Smart contract risk. Token functionality depends on code deployed to a blockchain. Bugs, exploits, or governance vulnerabilities can result in loss of funds. Institutional buyers should verify whether the issuer’s contracts have been audited by reputable security firms and whether active bug bounty programs exist.
Regulatory uncertainty. The classification of tokenized gold varies by jurisdiction. Some regulators treat gold tokens as commodities; others classify them as securities or payment tokens. The EU’s Markets in Crypto-Assets (MiCA) regulation, Singapore’s Payment Services Act, and evolving U.S. guidance from the SEC and CFTC all apply differently. This fragmentation creates compliance complexity for cross-border operations (IMF Global Financial Stability Report, 2025).
Custodian counterparty risk. Token holders bear exposure to both the issuer’s and the custodian’s solvency and operational integrity. If an issuer becomes insolvent, redemption claims depend on whether the custody arrangement segregates or pools client gold. Holders should confirm allocated versus unallocated storage before committing capital.
Liquidity concentration. XAUT and PAXG hold approximately 97% of the market, concentrating liquidity in two products. Smaller tokenized gold offerings may face thin order books and wider spreads, increasing execution costs for institutional-size positions.
Redemption friction. While physical redemption is technically available, minimum thresholds (often 400+ oz), delivery logistics, and processing times mean most holders trade tokens rather than redeem. For smaller positions, the “gold-backed” claim is operationally limited.
Institutions evaluating tokenized gold alongside other strategies for wealth protection through physical assets should weigh these risks against the operational advantages of tokenized exposure and the specific safeguards each platform offers.
How to Access Tokenized Gold Through Aerapass
Aerapass provides fractional precious metals ownership through its regulated platform, designed for wealth managers and financial institutions rather than retail investors.
The platform’s precious metals infrastructure includes:
- $10 minimum investment in LBMA-grade gold, silver, and platinum
- Custody at Le Freeport, Singapore - a tax-exempt freeport facility with 24/7 security and climate-controlled vaulting
- Heraeus-refined bullion meeting LBMA Good Delivery standards
- Malca-Amit logistics for physical movement and insurance
- Blockchain verification providing transparent proof of reserves
- API integration enabling wealth managers to embed precious metals into their own client-facing platforms
Precious metals sit within Aerapass’s broader multi-asset trading infrastructure, which includes FX, cryptocurrency, and commodity products under a single integration - serving clients across 120+ countries from six licensed jurisdictions. The platform is licensed under Singapore’s Payment Services Act and registered with the Singapore Ministry of Law as a Precious Stones and Precious Metals Dealer.
Frequently Asked Questions
What is gold tokenization?
Gold tokenization converts physical gold bullion into digital tokens on a blockchain. Each token represents ownership of a specific quantity of real, vaulted gold. The physical metal remains in secure custody while the token enables fractional ownership, 24/7 trading, and instant settlement without moving the underlying metal.
How does tokenized gold maintain its value?
Tokenized gold maintains its value through 1:1 backing with physical gold held in audited vaults. The token price tracks the spot gold price because holders can redeem tokens for physical metal, creating an arbitrage mechanism that keeps the token price aligned with the value of the underlying bullion.
Is tokenized gold safe?
Tokenized gold from established issuers is backed by LBMA-certified gold in independently audited vaults. However, token holders face smart contract risk, issuer counterparty risk, and regulatory uncertainty that physical gold holders do not. Safety depends on the specific product’s audit frequency, regulatory status, custody type (allocated vs. unallocated), and the issuer’s financial stability.
What fees are involved in buying tokenized gold?
Fees vary by platform. Common charges include a purchase spread (0.1-1.0%), an annual custody or management fee (0-0.25%), and network transaction fees for on-chain transfers. Some platforms also charge redemption fees for converting tokens back to physical gold or cash. Compare total cost of ownership, not just the headline purchase fee, before selecting a platform.
How is tokenized gold regulated?
Regulation varies by jurisdiction and product structure. Paxos Gold (PAXG) operates under New York Department of Financial Services oversight. Tokenized gold in Singapore falls under the Payment Services Act and the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act. The EU’s MiCA regulation applies to crypto-asset issuers operating in Europe. No single global regulatory standard exists.
What is the minimum investment for tokenized gold?
Minimums range from $10 on platforms like Aerapass to the price of one full troy ounce - between $4,200 and $5,600 during the first half of 2026 - on blockchain-native platforms like XAUT. Paxos Gold (PAXG) allows fractional purchases from 0.01 PAXG (approximately $42-56 at 2026 prices).
Can tokenized gold be redeemed for physical gold?
Yes. Most major tokenized gold products offer physical redemption. PAXG holders can redeem for LBMA Good Delivery bars through Paxos’s London vault network. XAUT offers physical delivery in Switzerland. Minimum redemption thresholds typically apply, often requiring at least one full bar (approximately 400 troy ounces) for physical delivery. Smaller positions can usually be redeemed for cash equivalent.
Regulatory Disclosure: Aerapass precious metals services are provided through Aerapass, a Major Payment Institution licensed by the Monetary Authority of Singapore and registered with the Singapore Ministry of Law as a Precious Stones and Precious Metals Dealer. This article is for educational purposes only and does not constitute investment advice. Gold prices fluctuate and past performance does not guarantee future results. Investors should conduct their own due diligence before making investment decisions.
Sources cited: World Gold Council (2025 Central Bank Gold Reserves Survey), London Bullion Market Association (Good Delivery Rules, Accredited Refiners List, Market Data), CoinGecko (Tokenized Gold Market Data, February 2026), IMF (Global Financial Stability Report 2025, COFER Database), Boston Consulting Group/ADDX (Relevance of On-Chain Asset Tokenization, 2024), Paxos Trust Company (product disclosures), Tether Gold (product disclosures).
The content on this page is produced by Aerapass for general informational purposes only and does not constitute financial advice, investment advice, or any other form of professional advice. Aerapass is a technology platform provider serving financial institutions, wealth managers, and fintech companies. Before making any financial decision, you should consult with a qualified, licensed financial advisor who can take your individual objectives and circumstances into account.
