Gold-Backed Token Issuance: Legal Considerations and Global Regulatory Insights
Gold-backed tokens sit at the intersection of tradition and innovation. They transform one of the oldest and most trusted stores of value—gold—into a blockchain-native format.
Yet, moving from a physical gold bar to a legally compliant token is not a matter of code alone. It requires a carefully designed legal, regulatory, and operational framework capable of withstanding scrutiny across multiple jurisdictions.
Why Gold-Backed Tokens Matter
Most cryptocurrencies are not backed by anything physical, and their value is determined purely by market sentiment. This intangible nature remains one of the strongest arguments against Bitcoin and similar assets. Gold-backed tokens, by contrast, derive their value from a physical commodity with a long and stable history as a store of wealth.
This underlying connection offers two advantages:
- Investor Confidence: The tangible nature of gold provides reassurance to risk-conscious and institutional investors.
- Predictable Price Correlation: Gold-backed tokens track the price of gold, making their value movements easier to understand and forecast.
Yet, the benefits come with a caveat: gold-backed tokens will rise and fall in line with gold itself. Unless gold’s market value surges, holders should not expect outsized returns simply because the asset is tokenized.
How Gold-Backed Tokens Compare
To understand their position within the broader tokenization landscape, gold-backed tokens can be compared to two neighbouring categories: stablecoins and tokenized securities (gold ETFs). Each has its own regulator, purpose, and volatility profile.
Gold-Backed Tokens vs. USD Stablecoins
While USD-backed stablecoins are pegged to a fiat currency, gold-backed tokens are tied to a commodity with intrinsic value. They can act as a hedge for investors looking to diversify away from purely fiat-backed digital assets.
The key structural difference is that gold-backed tokens require robust arrangements for storage, custody, and verification of the physical gold, each with legal implications that must be resolved at the outset.
Gold ETFs vs. tokenized Gold
While gold ETFs track the price of gold and are traded on stock exchanges, tokenized gold is a blockchain-based representation of physical gold ownership. Unlike ETFs, tokenized gold can be traded 24/7 across global platforms and offers more flexible settlement and redemption options.
However, ETFs are embedded within well-established securities frameworks, while tokenized gold requires bespoke compliance measures to align with each jurisdiction’s commodity and securities laws.
The Structuring Challenge: From Gold Bar to Regulated Digital Asset
The feasibility of directly issuing gold as a token depends on regulatory allowances for representing commodities on distributed ledger technology. While some jurisdictions permit direct tokenization, others still require intermediaries such as central securities depositories or licensed custodians.
Where direct tokenization is not possible, indirect tokenization becomes the preferred route:
- An intermediary legal structure — often a Special Purpose Vehicle or regulated fund — holds the physical gold.
- The ownership interest in that entity is then represented as tokens on-chain.
- Custodial arrangements ensure the gold is segregated, audited, and redeemable, protecting investors from counterparty risk.
This approach enables fractional ownership, simplifies trading, and allows tokens to circulate within regulated digital asset markets. The legal design of these intermediary structures determines the level of investor protection, tax treatment, and marketability.
Where Can You tokenize Gold?
Jurisdiction is the single most important factor in determining whether a gold-backed token will gain traction with institutional investors and maintain compliance across multiple markets. It dictates not only whether tokenization is legally possible, but also the licensing requirements, custody arrangements, and the breadth of investor access.
Switzerland
Switzerland has long been a global leader in gold trading and custody. FINMA explicitly recognises “asset tokens,” making it possible to issue gold-backed tokens within a clear legal framework. Investor trust is very high thanks to the country’s reputation and strong regulatory regime. Costs are higher, but access to crypto-friendly banks and a stable environment make Switzerland a preferred choice for institutional projects.
European Union (MiCA framework)
MiCA provides a harmonised framework for asset-referenced tokens across the EU. Gold-backed tokens will fall under this regime, requiring licensing, prospectus filings for public offerings, and strict AML/CTF compliance. While trust is high due to EU-level supervision, practical implementation differs by member state, and banking support can be inconsistent.
Liechtenstein
Liechtenstein offers one of the most comprehensive frameworks for tokenization. Projects benefit from EU passportability, high regulatory credibility, and access to institutional investors. However, compliance costs are substantial, and a local compliance officer is mandatory. Its flexible approach makes it attractive for gold-backed token issuers.
United Arab Emirates (ADGM & DIFC)
The UAE is emerging as a hub for digital assets, with ADGM and VARA providing clear frameworks for tokenization. DLT Foundations and flexible SPVs allow for gold-backed structures. Retail distribution is restricted, but private placements are straightforward. Fast licensing and crypto-friendly banking make UAE attractive for scaling projects regionally.
British Virgin Islands (BVI)
Similar to Cayman, BVI provides a tax-neutral environment and flexible company law. Direct tokenization is not common, but BVI entities often act as SPVs in multi-jurisdictional structures. Institutional investors may view it as less credible, and banking is complicated. Still, it remains a cost-effective option for private projects.
Outside the established financial centres, there are also instructive emerging examples. Zimbabwe’s central bank has issued ZiG, a state-backed gold token with legal tender status, demonstrating how tokenization can be integrated into a sovereign monetary system. In the Caribbean, Antigua & Barbuda has embedded tokenization into its Digital Assets Business Act, providing a licensing route for commodity-backed tokens in a smaller but potentially nimble jurisdiction.
Selecting the right jurisdiction is not simply a legal decision — it is a market positioning strategy. The choice determines not only how the token will be regulated, but also where it can be marketed, how it will be perceived by investors, and whether it will meet the technical and operational standards of institutional counterparties.
Case Studies: What Works in Practice
Here are several illustrative case studies of gold tokenization, ranging from well-established offerings to innovative platforms shaping the future of Real World Asset (RWA) tokenization.
Tether Gold (XAUt) offers a direct ownership model where each token represents one fine troy ounce of physical gold in a Swiss vault. The holder's specific serial number and bar details are identifiable on the chain. It is known for its deep liquidity on major exchanges and transparent attestations.
Paxos Gold (PAXG) is a benchmark for regulatory compliance. Each PAXG token is backed by one London Good Delivery gold bar stored in professional vaults in London. Paxos Trust Company, the issuer, is a regulated trust. Its key strength is its charter from the NYDFS, making it a trusted option for institutional investors.
Denario.Swiss exemplifies the precise Swiss approach to tokenising precious metals. Its model utilises a robust legal structure and partnered insured custody to ensure full banking compliance.
Beyond issuers, infrastructure platforms are vital for sector growth. Plume Network is positioned as the first Layer 2 blockchain dedicated to Real World Assets (RWA). Its goal is to solve key industry challenges like cumbersome onboarding, lack of compliance infrastructure, and poor liquidity. By providing a specialized environment, Plume makes it easier and more efficient for projects to launch tokenized assets, including gold. The existence and growth of such specialized infrastructure underscore the maturation of the RWA sector. They provide the necessary tools for scalability, transparency, and analysis, which are vital for attracting institutional participation.
These examples highlight two consistent themes for a successful gold-backed token:
- Regulatory Credibility is Paramount: Success is tightly linked to operating within a clear regulatory framework (e.g., NYDFS for Paxos, Swiss law for Denario).
- Iron-Clad Custody is Non-Negotiable: Investor trust is built on transparent, secure, and insured storage solutions with reputable custodians. The choice of jurisdiction for the vaults is as important as the jurisdiction for the legal entity.
Structuring for Longevity and Market Reach
Gold-backed tokens combine the reliability of a centuries-old store of value with the innovation of blockchain. But without careful legal structuring, these projects risk regulatory blockages and market distrust.
The optimal framework for gold-backed tokenization is highly jurisdiction-dependent and benefits from strategic use of intermediary legal structures. The choices you make at the outset — from the vault location to the licensing regime — will define whether your token is merely tradable, or truly market-ready for institutional adoption.
If you are considering launching a gold-backed token, we can help design a compliant, scalable structure that balances investor confidence, operational efficiency, and regulatory certainty.
Next Steps: Ready to launch your gold-backed token? Let’s talk. Our team of legal experts will help you navigate the regulatory maze and set you up for long-term success.
Ilona is a legal specialist at the forefront of tech & Web3 regulation. Passionate about the intersection of law and tech, she has collaborated on AI systems (general & legal) development and launched her charity NFT project. Ilona holds degrees and certifications from different universities, providing a global perspective to her practice.
