RWA | Tokenized Gold Market Value Exceeds $1 Billion, What Is Gold-Backed Stablecoin PAXG?

Following the Citi Bank report that tokenization of financial and real-world assets RWA could be a "killer app," a report from Bank of America also considers the tokenization of real-world assets such as commodities, currencies, and stocks as a "key driver of digital asset adoption." The report also mentions that with the acceleration of tokenizing real-world assets, the value of the tokenized gold market exceeded $1 billion last month.

PAX Gold (PAXG)

Tokenized gold operates similarly to stablecoins, with its value pegged to gold. It provides investors with an alternative way to invest in gold without paying ETF management fees or bearing the storage costs and risks associated with physical gold bars. The largest issuers of tokenized gold currently are stablecoin issuers Paxos and Tether.

Using Paxos as an example, each PAXG token is backed by one troy ounce of gold, abbreviated as TOZ. 1 troy ounce is approximately 31.1 grams of gold, stored in the LBMA London Bullion Market Association vault in London, an over-the-counter trading market overseen by the Bank of England and the world's largest gold over-the-counter trading center. The smallest trading unit is 0.01 TOZ, which, at the current price of $2000 per ounce of gold, translates to about $20 to invest in PAXG. PAXG can be redeemed or created using either USD or gold, allowing investors to engage in pure price speculation with USD settlement, profit from price differentials, or store it in digital form and convert it to physical gold when needed.

According to Paxos' latest report from February, a total of 251,816 PAXG tokens have been issued, with a current market value of approximately $500 million.

Potential for Growth in Tokenized Gold Sector

According to the World Gold Council's latest statistics for 2022, the global gold inventory stands at 208,874 tons, valued at $13.4 trillion. Gold bars, coins, and gold ETFs account for 46,517 tons, or 22% of the total, with a market value of around $3 trillion. Tokenized gold currently represents only 0.033% of the total, indicating significant potential for future growth.

Reports in January indicated that Russia and Iran have begun exploring gold-backed stablecoins to facilitate international trade settlements. Additionally, Russian state-owned bank Sberbank has issued tokenized gold on the Sber blockchain platform.

More RWA Applications: Tokenized RWA as a killer application, OpenEden launches tokenized treasury bond vault