Why Tokenized Gold Still Can't Compete With Dollar Stablecoins
RWA Signal Insight
CommoditiesTokenized gold reached a $6 billion market capitalization by February 2026, yet it remains a minor fraction of the $318 billion dollar-pegged stablecoin market. While stablecoins like USDC and USDT benefit from purely digital, high-velocity bookkeeping, tokenized gold is constrained by the physical logistics of LBMA-accredited bullion vaults. Paxos Gold (PAXG) and Tether Gold (XAUT) dominate the sector, requiring the physical acquisition, shipping, and insurance of 13-kilogram bars for every token issued. This architectural friction creates a significant liquidity gap, as stablecoins settled over $33 trillion on-chain in 2025 compared to the hundreds of millions in daily volume for gold tokens. Despite gold's macro appeal as a hedge against central bank hoarding and dollar devaluation, the reliance on jurisdictional custody and periodic attestations limits its utility as high-frequency DeFi collateral. The inability to provide real-time proof-of-reserve for physical assets further separates gold tokens from the instant verifiability of treasury-backed stablecoins. Consequently, tokenized gold struggles to scale, as moving significant volume would require massive physical infrastructure shifts rather than simple smart-contract engineering.
Key points
- Tokenized gold market cap hit $6 billion in February 2026 with 1,300% volume growth.
- Stablecoins settled $33 trillion on-chain in 2025, dwarfing tokenized gold's daily liquidity.
- PAXG and XAUT control 96-97% of the market, relying on physical vault-based custody.
- Scaling to $50 billion would require moving 325 tonnes of gold into physical vaults.
Background
Tokenized gold protocols like PAXG and XAUT provide digital ownership of physical gold bars stored in secure, audited vaults. Each token is typically pegged to one fine troy ounce of gold, allowing investors to gain exposure to the metal on-chain while maintaining a claim on the underlying physical asset.