Gold-Backed Stablecoins in 2025: Full Comparison of XAUt, PAXG, and Digital Gold Market Trends

Gold has been on a historic tear in 2025, reaching record levels near $3,400 per troy ounce. A major catalyst has been unprecedented demand from central banks and institutions seeking safe-haven assets amid economic uncertainty.

For the third year in a row, central banks collectively bought over 1,000 metric tons of gold in 2024 – a sharp reversal after decades of net gold selling by monetary authorities. “This is not normal,” noted Christopher Gannatti of WisdomTree. “For decades, central banks were net sellers of gold. Now they’re stockpiling it again”. The World Gold Council reports that this marked acceleration in central bank gold accumulation – up from an average of 400–500 tons per year in the prior decade – reflects rising geopolitical and currency risks. In a recent survey, a record 95% of central bankers said they expect global gold reserves to keep increasing over the next 12 months, underscoring gold’s renewed importance in reserve management.

This heavy official buying has coincided with record inflows into gold investment funds. In the first half of 2025 alone, global gold exchange-traded funds (ETFs) saw approximately $38 billion of net inflows – the largest surge in five years – adding about 397.1 metric tons to their holdings. By the end of June 2025, total gold held by ETFs reached 3,616 tons, the highest since 2022. These inflows illustrate robust institutional appetite for gold as a hedge. According to the World Gold Council, U.S.-listed gold ETFs led the pack (206.8 tons added in H1 2025), but demand was global – Asian-listed funds drew 104 tons (despite representing only 9% of assets) amid a broad-based flight to safety. Steady ETF buying provides continuous physical demand in the market, reducing available supply and supporting high price levels.

Several macroeconomic forces are feeding this gold rush. Geopolitical tensions and trade disputes – particularly an escalating U.S.–China trade war under the current Trump administration – have stoked fears of currency weaponization and global financial instability. In 2025, President Donald Trump’s aggressive tariff policies and brinkmanship on trade have unnerved investors and central bankers alike. In fact, 59% of central banks cited potential trade conflicts and tariffs as relevant factors in managing their reserves, according to the WGC survey. With major economies jostling over trade, many countries are hedging against the U.S. dollar by bolstering gold holdings as a neutral reserve asset.

Inflation concerns have further amplified gold’s appeal. Noted economist Peter Schiff emphasized that persistent inflation is a key driver behind gold’s strength. After a period of post-pandemic tightening, price pressures have resurfaced in the U.S. – and new import tariffs are expected to push costs higher for producers and consumers in late 2025. Federal Reserve officials, who earlier anticipated easing monetary policy, have grown cautious. Morningstar’s senior U.S. economist Preston Caldwell, for instance, has delayed expectations of rate cuts due to the renewed inflationary trend. In June, the Fed signaled it might hold off on cutting interest rates as long as inflation remains above target. This backdrop of rising prices and a wary Fed has boosted gold’s status as an inflation hedge. Gold’s price was already up ~30% year-over-year by mid-2025, and even briefly hit an all-time high of $3,500/oz in April 2025, nearly double its level from early 2022.

The convergence of geopolitical strife, currency instability, and inflation fears has created a perfect storm supporting gold. Traditional safe-haven demand is evident across the board – from central bank vaults to ETF portfolios. But in the crypto sector, it’s also fueling interest in a newer vehicle: gold-backed stablecoins. These digital tokens, each backed by physical gold, have been gaining traction as an innovative way to own gold. In 2025’s climate of uncertainty, gold-backed crypto tokens are surging alongside the metal’s price, offering investors a blend of gold’s time-tested stability and the flexibility of blockchain. Below, we examine the gold-backed stablecoin landscape – with a focus on the leading tokens – and how they compare in this high-demand market.

The Rise of Gold-Backed Stablecoins

Gold-backed stablecoins are digital assets pegged to physical gold reserves. Each token typically represents ownership of a specific amount of gold (for example, one token = one fine troy ounce of gold) held in a secure vault by the issuer. In essence, they function like a blockchain-based gold ETF or digital gold certificate, allowing investors to gain exposure to gold’s price without dealing with the logistics of storing and insuring physical bars. What differentiates them from fiat-pegged stablecoins is that their value floats with the market price of gold rather than a fiat currency. This means they are stable relative to gold itself – an asset known for long-term value preservation – but can still fluctuate in dollar terms (as gold does). In 2025, for instance, major gold stablecoins have risen roughly 40% in USD value over 12 months, mirroring gold’s upswing.

The appeal of tokenized gold lies in combining gold’s safe-haven qualities with crypto’s advantages in portability and divisibility. Investors can purchase a gold token as easily as any cryptocurrency and transfer it globally in minutes, 24/7 – something not possible with physical bullion. Tokens are often divisible to many decimal places, so one can own fractional ounces of gold, lowering the barrier to entry for small investors. “XAU₮ combines the benefits of physical gold (security, long-term value stability, full redeemability) with the portability, speed, and divisibility of digital assets,” explains one industry report. This makes gold-backed stablecoins an attractive option for those who want hard-asset backing for their digital money. They can serve as a hedge against inflation or currency devaluation, much like gold, while fitting into crypto portfolios and DeFi applications.

Crucially, reputable gold stablecoins are fully reserved and auditable. Issuers maintain vaults of physical gold equal to 100% of the tokens in circulation, and they regularly publish attestation or audit reports. For example, both Tether Gold and Pax Gold – the two market leaders – undergo independent attestations to verify that each token is indeed backed 1:1 by investment-grade bullion. This transparency is key to earning user trust, especially given the checkered history of some algorithmic or under-collateralized stablecoins. In fact, many gold-backed tokens position themselves as more trustworthy than fiat stablecoins by pointing to their tangible reserves. As a further assurance, most offer token holders the right to redeem tokens for physical gold (though usually with certain minimum amounts and fees, as we’ll discuss).

While gold-backed crypto tokens have existed for several years, they remained a niche in the broader crypto market – until recently. 2025 has been a breakout year for these assets. The surge in gold’s price and the macroeconomic turmoil have shined a spotlight on digital gold alternatives. Investors who might be wary of fiat-pegged stablecoins (amid regulatory crackdowns and reserve concerns) see comfort in a token backed by something as universally trusted as gold. The total market capitalization of gold-backed stablecoins has swelled accordingly. By mid-2025, the combined market cap of gold-backed tokens exceeded $1.7 billion, up significantly from the prior year, with growth driven both by new issuance and gold’s rising price. This is still tiny compared to the >$120 billion fiat stablecoin market, but the trend is upward.

Moreover, new players and platforms are emerging to support tokenized gold. Some forward-looking banks and fintech firms have started exploring gold tokens as a service for clients. In one notable development, Tether – the largest stablecoin issuer – even launched a hybrid token called “Alloy” that is backed 50% by gold and 50% by dollars, blending the stability of USD₮ with the inflation resistance of XAU₮. And in the decentralized finance (DeFi) arena, protocols are beginning to accept gold tokens as collateral or liquidity, hinting at wider integration. All these signs point to a maturation of the gold-backed token space.

Still, not all gold-backed stablecoins are created equal. Let’s examine the most popular and capitalized examples on the market in 2025, and compare their features, use cases, and performance. The two clear leaders are Tether Gold (XAU₮) and Pax Gold (PAXG), which together account for the vast majority of the gold stablecoin market. We’ll also survey other notable projects – from government-backed tokens to Shariah-compliant offerings – and discuss the challenges that have kept this sector a side bet for many investors.

Tether Gold (XAU₮): Digital Bullion from the Stablecoin Giant

Launched in January 2020, Tether Gold (XAU₮) has quickly become one of the largest gold-backed cryptocurrencies. It is issued by TG Commodities Ltd (an affiliate of Tether Holdings) and each XAU₮ token represents one fine troy ounce of physical gold on a London Good Delivery bar. The gold is custodied in Swiss vaults, and Tether periodically publishes attestations of the reserves (audited by firms like BDO Italia). As of Q2 2025, Tether Gold’s reserves stood at over 7.66 tons of gold, stored in a secure vault in Switzerland. This was backing a circulating supply of roughly 246,500 XAU₮ tokens, equivalent to about 259,000 troy ounces of gold, with a market capitalization of around $800 million at the end of June. In Tether’s latest attestation report, each issued token was matched by an ounce of physical gold held in the vault, and the bars’ serial numbers and details were made available for token holders to verify.

Like its USD₮ stablecoin sibling, XAU₮ has benefited from Tether’s strong brand and global user base. The token is actively traded on major exchanges including Bitfinex (Tether’s sister exchange), Bybit, KuCoin and BingX. Recently, it also expanded into Southeast Asia – for instance, Thailand’s Maxbit exchange listed XAU₮ in 2025, providing baht-based access to the token. XAU₮ initially launched on Ethereum as an ERC-20 token and later became available on Tron’s TRC-20 network as well, facilitating cheaper and faster transfers. As of early 2025, however, the original XAU₮ remained confined to those two blockchains (Ethereum and Tron). To broaden its reach across the crypto ecosystem, Tether introduced an “omnichain” version called XAUt0 in mid-2025. XAUt0 uses LayerZero’s cross-chain token standard to allow seamless movement of Tether Gold across multiple blockchains without wrappers. It debuted on The Open Network (TON) – the blockchain associated with Telegram – with plans to expand to other DeFi-centric chains by Q3 2025. This move is aimed at making gold tokens DeFi-compatible, so they can be easily used as collateral in lending protocols or traded on decentralized exchanges just like USDT. As a result, Tether Gold is increasingly accessible and liquid in the crypto markets.

Market performance: In the 12 months through mid-2025, XAU₮ delivered roughly a 40% return in USD terms, tracking gold’s price rally. The token’s price closely mirrors the spot gold price (minus small market spreads), so by July 2025 one XAU₮ token was trading around $3,300–$3,400. Trading volumes in XAU₮ have risen, though they remain modest compared to major fiat stablecoins. On a typical day, XAU₮ sees $10–20 million in turnover; on peak days in 2025 it spiked to over $150 million in 24-hour volume. Liquidity has deepened with its listing on multiple exchanges and on-chain DEX pools. Notably, Tether’s introduction of XAUt0 (with integration into Telegram’s wallet for potentially millions of users) could significantly boost retail usage of XAU₮ going forward. As of June 2025, CoinGecko ranked XAU₮ as the largest gold-backed crypto token by market cap at about $832 million (just slightly edging out Pax Gold at that moment).

Key features and considerations: Tether Gold offers holders the ability (in theory) to redeem tokens for physical gold. However, the redemption process is geared towards large holders. According to Tether’s terms, a minimum of 430 XAU₮ tokens is required to redeem for one LBMA standard 400-ounce gold bar. In practice, this means you’d need over $1.4 million worth of XAU₮ to claim physical delivery of a gold bar, and you must undergo full KYC verification with TG Commodities. Smaller holders cannot directly swap tokens for a few coins or ounces of gold from Tether; instead, they would sell the tokens on an exchange if they want to cash out. The minimum direct purchase from Tether is 50 XAU₮ (~$165k), reflecting Tether’s focus on institutional and high-net-worth clients for direct operations. These constraints, while limiting for redemption, are actually similar to gold ETFs (which typically only allow redemptions in large bar quantities to authorized participants). For most retail investors, XAU₮ serves as a trading and storage instrument for gold exposure rather than a means to take possession of metal.

On the transparency and legal front, Tether has made some strides to bolster confidence in XAU₮. The gold backing XAU₮ is audited and insured, and in early 2023 Tether migrated the legal structure under the regulatory framework of El Salvador’s Digital Asset Issuance law. This move to El Salvador (which has crypto-friendly laws) provides a regulatory home and oversight for Tether’s commodity tokens. Still, it’s worth noting that Tether Gold is not regulated by U.S. authorities (unlike its competitor Pax Gold). Some risk-averse investors view this as a potential concern, given past questions around Tether’s transparency with its dollar stablecoin reserves. That said, the direct 1:1 nature of XAU₮ (and the inability to rehypothecate or leverage the gold) makes its reserve mechanism straightforward. Each token corresponds to a specific serial-numbered gold bar or portion thereof, which token holders can even look up on Tether’s website using their wallet address.

In summary, Tether Gold in 2025 stands out as a pioneering digital gold token combining a large reserve of physical bullion with the liquidity of Tether’s crypto ecosystem. It has attracted a diverse set of users – from crypto traders looking to park value in gold during volatile times, to long-term holders in regions facing inflation who prefer gold over dollars. XAU₮’s growth (both in market cap and integrations) reflects a broader shift towards commodity-backed digital assets as a permanent fixture in the crypto landscape.

Pax Gold (PAXG): Regulated Gold on the Blockchain

Pax Gold (PAXG) is the other heavyweight in the gold-backed token arena, and it offers a somewhat different value proposition: a highly regulated, institution-friendly approach to tokenized gold. Launched by New York-based Paxos Trust Company in late 2019, PAXG is an ERC-20 token with each token representing one fine troy ounce of a London Good Delivery gold bar stored in professional vault facilities in London. Paxos is a qualified custodian and a trust company regulated by the New York State Department of Financial Services (NYDFS), meaning PAXG operates under stringent oversight. Every month, Paxos publishes attestation reports from third-party auditors to verify the total PAXG supply is fully backed by allocated physical gold in the vaults. The gold bars backing PAXG are held in the vaults of Brink’s, a leading LBMA-approved vault provider, and each bar is identified by serial number, purity, and weight. Uniquely, Paxos allows PAXG holders to lookup the serial number and characteristics of their specific allocated gold bar via an online tool using their wallet address – providing an extra layer of transparency into the exact bullion behind the tokens.

As of late July 2025, Pax Gold had a circulating supply of approximately 281,750 PAXG tokens, equivalent to about 8.76 tons of gold in custody. With gold near $3,350/oz, the market capitalization of PAXG stood around $940 million, making it the single largest gold-backed crypto by market cap (a title it has traded back-and-forth with XAU₮ depending on price fluctuations). Pax Gold’s growth has been steady – both organic and price-driven – reflecting strong demand particularly from more traditional and institutional crypto participants.

Liquidity and market access: PAXG boasts the highest trading liquidity among gold tokens, partly due to Paxos’s reputation and integrations. It is listed on many major cryptocurrency exchanges worldwide, including Binance, Kraken, Coinbase, Crypto.com, and others. On Binance (one of the world’s largest exchanges), PAXG enjoys substantial volume in pairs against stablecoins and other currencies, which greatly improves its market depth. Daily trading volumes for PAXG were averaging over $60–80 million in mid-2025 – roughly double or more that of XAU₮ on most days. This robust liquidity can be attributed to the token’s regulatory clarity and trust factor: many exchanges and traders are comfortable with PAXG since it’s issued by a regulated financial institution with a solid track record (Paxos is also known for issuing the Pax Dollar (USDP) stablecoin and serving as infrastructure for PayPal’s crypto). PAXG is also available on various fintech platforms; for example, investment app Uphold and others offer direct purchase of PAXG, sometimes marketing it as “digital gold” to their users. Additionally, Pax Gold can be traded 24/7 and held in any Ethereum-compatible wallet, giving it far more flexibility than traditional gold investment vehicles.

Redeemability and fees: Paxos has made PAXG relatively accessible. The token has no minimum holding requirements; one can buy as little as 0.01 PAXG or even less on exchanges (small fractions of an ounce). The creation/redemption fees are also quite low (Paxos charges a modest fee of around 0.02 PAXG for on-chain token conversions). However, similar to Tether Gold, redeeming PAXG for physical gold bars directly from Paxos requires a minimum of 430 PAXG (to get a ~400 oz London Good Delivery bar). In practice, this means small holders won’t be shipping a gold bar to their house; instead, they would sell PAXG for cash or perhaps use Paxos’s network of gold distributors for smaller redemptions. Paxos has a partnership with a bullion dealer (Alpha Bullion) that can facilitate conversions of PAXG into smaller gold products or cash without needing the full 430 ounces. This makes it somewhat easier for an average investor to extract value from PAXG in physical form, compared to Tether’s process. Still, the majority of PAXG users treat it as a trading asset or a store of value rather than ever redeeming for metal. Paxos does not charge custody fees for PAXG (the cost of storage is built into a small tokenization fee and the spread), which they point out is competitive with or better than typical gold ETF expense ratios.

Regulatory and safety profile: One of Pax Gold’s strongest selling points is its regulatory status. It is one of the few crypto assets that is a regulated digital commodity. Paxos, as an NYDFS-regulated trust, must meet capital requirements and consumer protection standards. PAXG is legally deemed redeemable for gold; holders are essentially beneficiaries of Paxos’s custody of physical gold under the trust structure. In the unlikely event of Paxos’s insolvency, the gold holdings are segregated and meant to be bankruptcy remote for token holders. These assurances make PAXG appealing to institutions or individuals who might not fully trust an offshore issuer. Additionally, PAXG’s compliance means it is often treated more favorably by exchanges in jurisdictions with strict regulations. For example, PAXG has been green-listed by regulators in certain places where unregulated tokens might face hurdles.

Integration in DeFi and traditional finance: PAXG has also found usage in the burgeoning DeFi (Decentralized Finance) world. Its presence on Ethereum means it can be plugged into smart contracts. Indeed, PAXG is accepted as collateral on some DeFi lending platforms and protocols. MakerDAO, the issuer of the DAI stablecoin, has incorporated PAXG as a collateral asset in its system, allowing users to lock PAXG and borrow DAI against it. Other platforms like Compound have also considered or enabled PAXG markets, given its stability and liquidity. This effectively lets crypto users borrow against tokenized gold – mimicking how one might take a loan against gold holdings – but all on-chain. Outside of DeFi, even some traditional financial firms have shown interest: for instance, in late 2022 Paxos won approval to list PAXG on the Société Générale’s digital asset platform in Europe, and some gold investment funds have contemplated using PAXG for liquidity. These integrations point to PAXG’s role as a bridge between traditional gold markets and digital finance.

In sum, Pax Gold distinguishes itself as a trustworthy, liquid, and institution-ready gold token. It aims to make gold investment as easy as crypto trading, while providing confidence that the tokens are as good as gold in the vault. For investors who prioritize regulatory compliance and the option of eventual redemption, PAXG is often the gold stablecoin of choice. Its slight lead in market cap and higher trading volumes (compared to XAU₮) reflect that many view it as the gold standard (no pun intended) of commodity tokens – one with the pedigree to potentially attract even larger inflows if the trend of tokenization continues.

Other Notable Gold-Backed Tokens in the Market

Beyond the two juggernauts XAU₮ and PAXG, the gold-backed crypto space features a variety of smaller and niche projects. While none of these has (so far) achieved the scale of the top two, they are worth understanding as they often target specific use cases or regions. Here we survey some of the other gold-backed stablecoins available in 2025 and how they fit into the market:

• Perth Mint Gold Token (PMGT): Launched in 2019, PMGT is a tokenized version of physical gold certificates from Australia’s Perth Mint (which is owned by the Government of Western Australia). Each PMGT represents 1 troy ounce of gold secured by the Perth Mint and guaranteed by the state government. Uniquely, PMGT has zero storage fees and is one of the few gold tokens backed by government-guaranteed gold. However, it has seen minimal adoption: PMGT trading volumes are negligible (often under a few hundred dollars daily). It is mainly obtainable via the Perth Mint’s app and a couple of platforms, which has limited its reach. PMGT demonstrates that even with a strong backing, a token needs exchange liquidity and wider integration to succeed.

• DigixGlobal (DGX): One of the earliest gold token projects, Digix pioneered gold-backed tokens on Ethereum as far back as 2016. 1 DGX token = 1 gram of gold (as opposed to the 1 oz standard of others). The gold is stored in Singapore and Canada under Digix’s custody, and the project underwent audits and a robust on-chain asset tracking system. DGX gained attention in the 2017–2018 era as a novel idea, but over time its usage declined. It has some built-in fees (storage and transaction fees) which may have hampered its competitiveness. By 2025, DGX volumes are very thin, and it’s listed on only a few niche exchanges. DigixDAO, the governing body that launched DGX, even dissolved and returned funds to token holders in 2020, raising questions about long-term support. DGX still exists as a functional token, but it represents a cautionary tale that being first doesn’t guarantee enduring market share if the ecosystem doesn’t grow.

• AurusGOLD (AWG): Aurus is a platform that partnered with precious metals dealers to tokenize gold, silver, and platinum. AWG tokens correspond to 1 gram of 99.99% gold from LBMA-certified refineries. The project’s model involves revenue sharing with vault providers and a network of brokers. Aurus has marketed itself in parts of Europe, the Middle East, and Latin America. While innovative, AWG remains a minor player; its market activity is sparse (volume data often not even reported). Nonetheless, Aurus carved a niche among some bullion dealers who offer its tokens to customers as an alternative to physical delivery.

• Kinesis Gold (KAU): Kinesis is a UK-based company that created a digital currency system backed by precious metals. KAU tokens represent 1 gram of gold allocated in various vaults worldwide. Kinesis has an entire monetary ecosystem, including a companion silver token (KAG) and even a yield system where transaction fees are shared among users (so holding KAU can earn a yield, incentivizing use as a currency). KAU has gained a following particularly in some gold enthusiast communities and in Indonesia (where a regional bank integrated it). However, in broader crypto markets, KAU is not widely traded – daily volumes were only around $170k in mid-2025. Much of its activity occurs on Kinesis’s proprietary exchange and platform rather than public crypto exchanges, which limits its visibility. Kinesis’s approach is ambitious, essentially trying to create a gold-based alternative monetary system; its relative lack of crossover into mainstream crypto finance, though, keeps it in a smaller league for now.

• Comtech Gold (CGO): An emerging project based out of the UAE, Comtech Gold issues tokens on the XDC (XinFin) blockchain representing 1 gram of gold each. It is notable for being Shariah-compliant, aiming to cater to Islamic finance markets where compliance with Shariah law is crucial for investor adoption. Each CGO token is fully backed by physical gold stored in Dubai, audited by reputed vaults, and the project received a Shariah certification in 2022. Comtech Gold saw a bit of traction as it aligned with Middle Eastern investor preferences; it even achieved daily trading volumes around $1–2 million at times – higher than most minor gold tokens – thanks to listings on exchanges like Bitrue and DigiFinex, and the support of gold dealers in the Gulf region. While still small compared to PAXG/XAU₮, CGO shows how region-specific factors (like Shariah compliance) can carve a niche in the gold token space. It also demonstrates multichain expansion, being on XDC network (which is optimized for finance and has low fees), differentiating it from the Ethereum-based pack.

• VNX Gold (VNXAU): Launched by Luxembourg-based fintech VNX, VNX Gold tokens correspond to physical gold bars stored in Liechtenstein. VNXAU is regulated under Luxembourg’s financial laws and targets European investors with a token that can be traded on both Ethereum and other networks (VNX enabled a version on Binance Smart Chain and others). It promotes compliance and origin-traceability of its gold. Despite these features, VNXAU’s market presence is minor; its daily volume was under $100k in mid-2025. Like other smaller tokens, limited exchange listings and competition from bigger players kept it mostly off the radar of average crypto users.

• GoldCoin (GLC): An unusual entrant, GoldCoin positions itself as a decentralized, mineable cryptocurrency pegged to gold. Instead of being directly redeemable, the project claims that 1,000 GLC tokens correspond to one ounce of gold, effectively making each GLC equal to 0.001 oz of gold. It’s also a Proof-of-Work coin, which is rare among stable-value assets. The idea is to combine gold’s stability with a Bitcoin-like decentralized mining model. However, maintaining a peg via mining incentives is challenging, and GLC’s real-world trading shows it’s thinly traded and not widely trusted as a stablecoin. The project’s long-term viability and backing mechanism are somewhat unclear; there’s no evidence of an audited gold reserve for GLC akin to PAXG or XAU₮. With only a few hundred dollars of volume a day, GoldCoin remains more of a curiosity than a significant market player.

• Miscellaneous and Newcomers: There are several other tokens and initiatives, each with unique twists: Meld Gold (MCAU) in Australia uses the Algorand blockchain to tokenize gold and integrate with the Melbourne Mint; Cash Telex (CTLX) claims to link a diversified gold portfolio to a token and even integrate NFTs (though it’s relatively obscure); AABB Gold (AABBG) is a token issued by a mining company (Asia Broadband) intended to be backed by gold assets and used in their own crypto wallet – it’s more of a corporate project and hasn’t gained broad adoption. We also see traditional bullion dealers launching token platforms (for instance, bullion banks experimenting with blockchain for settlement). Many of these ventures are in exploratory stages and their tokens have little liquidity.

The overall pattern in 2025 is that, outside of PAXG and XAU₮, gold-backed stablecoins have fragmented, low-liquidity markets. According to market analysis, PAXG and XAU₮ together constitute the vast bulk of trading volume and market cap in this sector, whereas the rest have “negligible or unavailable volume data, suggesting minimal market presence”. For example, KAU and VNXAU trade only tens of thousands of dollars a day, and some tokens like CACHE Gold (CGT) – which once offered 1 gram tokens redeemable from vaults in Singapore – are actually winding down operations by late 2025 due to insufficient uptake. This fragmentation means an investor looking beyond the top two would find very limited liquidity and perhaps difficulty entering/exiting positions in those tokens.

In practice, gold stablecoins find most of their user base in specific regions or communities. Middle Eastern and some Asian markets, where gold has cultural significance, have shown relatively stronger interest in tokens like CGO, KAU, or XAU₮. In these areas, gold-backed tokens may be used for long-term savings, wealth preservation, or Shariah-compliant investment vehicles. For instance, a family office in the UAE might hold CGO as a digital proxy for part of its gold allocation, or an Indonesian investor might use KAU on Kinesis’s platform to save in gold grams and spend via a debit card. By contrast, in Western markets and the broader crypto trading space, the usage of gold tokens remains mostly as a store-of-value play or speculative trade rather than a medium of exchange. It’s telling that gold-backed coins have not penetrated DeFi or payments to the extent dollar stablecoins have – you won’t see people quoting DeFi yields in XAU₮ or paying for coffee with PAXG. Gold simply isn’t the unit of account in the crypto economy (or the global economy), which limits these tokens’ role to that of an investment or hedging instrument.

Comparing the Leaders: XAU₮ vs PAXG (and Others)

It’s instructive to directly compare Tether Gold (XAU₮) and Pax Gold (PAXG), as they exemplify two approaches to the same idea. Both give exposure to gold on-chain, but there are differences in their design and market profile:

• Issuer and Regulation: XAU₮ is issued by Tether, an offshore company (now operating under El Salvador’s crypto laws) known for its USDT stablecoin; it is not formally regulated by U.S. authorities. PAXG is issued by Paxos, a U.S.-regulated trust company under NYDFS oversight, making it one of the most regulated crypto assets. This means PAXG follows stricter compliance (KYC/AML for direct issuance, etc.), whereas XAU₮, while it requires verification for direct purchase/redemption, can circulate more freely among crypto users without issuer interaction. Some risk-averse investors or institutions may prefer PAXG’s regulatory clarity, while others are comfortable with Tether’s track record and enjoy its flexibility.

• Custody of Gold: Both are backed by London Good Delivery gold bars, but in different locations. XAU₮’s gold is held in Swiss vaults (through a custodian on Tether’s behalf). PAXG’s gold is in London, held by Brink’s, a well-known bullion custodian. In practice, both storage arrangements are high-security and audited. Swiss vaults are prized for neutrality and safety, while London has the advantage of being the historic center of the gold trade (and within the LBMA chain of integrity).

• Transparency and Audits: Tether provides attestations (typically quarterly) for XAU₮ via accounting firms like BDO, confirming ounces held vs tokens outstanding. Paxos provides monthly attestations for PAXG and, as a trust, must report holdings to regulators. Additionally, Paxos offers that nifty bar lookup tool for PAXG so holders can see which bar their token corresponds to, whereas Tether publishes a list of gold bar details and a total but doesn’t necessarily tie specific tokens to specific bars on a per-user basis (except through requests). Both are quite transparent compared to many crypto projects – a necessity given the demands of precious metal investors.

• Token Standards and Compatibility: XAU₮ was initially only on Ethereum (ERC-20) but also launched on Tron (TRC-20) for faster transfers. Now, with XAUt0, it’s effectively chain-agnostic, starting with TON and potentially expanding to any chain that LayerZero supports. PAXG is primarily an ERC-20 token on Ethereum. Paxos could issue it on other chains (their infrastructure is flexible), but so far the focus has remained on Ethereum, which has the deepest liquidity and institutional acceptance. In terms of DeFi, Ethereum’s ubiquity gave PAXG a leg up – it could immediately plug into Ethereum-based DeFi platforms. XAU₮ being on Tron meant it was outside the Ethereum DeFi realm, though the majority of XAU₮ (by supply) actually still lives on Ethereum too (Tron usage has been smaller). The move to omnichain for XAU₮ signals an attempt to not be left out of multi-chain DeFi opportunities.

• Liquidity and Trading Volume: PAXG currently enjoys higher daily trading volumes and a slight edge in market cap. As noted, PAXG trades on big exchanges like Binance and Coinbase, giving it a broad audience. XAU₮ trades heavily on Bitfinex, which is popular but has a more limited user base, and on some derivatives platforms like Bybit. On-chain, PAXG has larger liquidity pools on Uniswap and is used in some yield protocols, whereas XAU₮ until recently had less presence in DeFi. According to one analysis, PAXG was averaging ~$67M daily volume vs ~$34M for XAU₮, reflecting its higher liquidity. However, XAU₮ volume did see spikes and it has been catching up as its market cap grows. Both are tiny compared to USDT (which sees tens of billions in daily volume), but within the gold token niche, they are the clear leaders – smaller tokens like Kinesis’s KAU or VNXAU have volumes in the hundreds or low thousands of dollars by comparison.

• User Base and Use Cases: There might be a slight difference in their typical users. PAXG, with its regulated nature, attracts more institutional and traditional investors – for instance, a hedge fund that wants gold exposure on its crypto books, or a U.S. individual who buys through a regulated platform. XAU₮ likely has more crypto-native users and emerging market users – those already using Tether products, or people in countries like Turkey, Argentina, or Nigeria where Tether’s USDT is popular and who might also trust a Tether gold token for savings. Both tokens see interest in gold-friendly regions like the Middle East. It’s noted that gold-backed stablecoins in general have stronger footholds in Asia and the Middle East, where gold is culturally favored, often being used for long-term savings or inflation hedging. XAU₮, for example, being pushed into Thailand and integrated with Telegram (very popular in Eurasia), seems to be targeting those demographics.

• Redemption Policy: Neither XAU₮ nor PAXG is ideal for redeeming small amounts of physical gold due to the 430 oz minimum for a bar (about 12.4 kg). PAXG offers slightly more avenues for partial redemption (via partners), whereas XAU₮ is essentially non-redeemable for the average person unless they accumulate a large holding. In practice, both tokens are redeemed by authorized participants or very large holders occasionally, but the vast majority of users never touch the physical gold; they trust that the backing is there if needed. This is similar to how gold ETFs function – most investors treat ETF shares as the asset, with only bullion banks interacting with the metal. One advantage tokens have is divisibility and transfer; you can send 0.001 PAXG to someone easily (worth a few dollars), which you couldn’t with an ETF share or a gold coin.

• Fees: Both have competitive fee structures. XAU₮ doesn’t charge ongoing fees to token holders (Tether likely covers storage costs from their operations). PAXG also has no custody fee, only small creation/redemption fees. Some smaller projects like Digix charged explicit storage fees that were passed to holders (reducing their token balance over time), which made them less attractive. By contrast, PAXG and XAU₮ have effectively zero carrying cost beyond maybe a slight bid/ask spread – a boon for long-term holders.

To sum up, PAXG vs XAU₮ often comes down to a matter of preference and convenience: If you value regulatory compliance, have access to Binance/Coinbase, or plan to use gold in DeFi, PAXG is appealing. If you are already in the Tether ecosystem, want exposure on Tron or other chains, or prefer Tether’s liquidity networks, XAU₮ is a strong choice. Both tokens reliably track gold’s market price and have proven their 1:1 backing over several years now, so on pure safety of backing there’s little to choose between them – both have so far operated without incident or discrepancy in reserves (helping to dispel early skepticism that crypto-backed gold might not really have the gold).

All other gold tokens currently play a minor supporting role relative to these leaders. They might cater to specific niches or offer unique features (like KAU’s yield or CGO’s Shariah certification), but their low liquidity and market caps (typically under $10 million, often under $1 million) make them impractical for most investors at scale. As one industry commentary put it, outside PAXG and XAU₮, the gold stablecoin ecosystem remains “fragmented, illiquid, and largely inaccessible to the average crypto user”. This highlights the network effect advantage that the top two have – liquidity begets liquidity, and users gravitate to where they can easily enter and exit positions.

Why Haven’t Gold Stablecoins Overtaken Other Stablecoins?

Despite their growth, gold-backed stablecoins are still far behind dollar-pegged stablecoins in adoption. It’s worth exploring the challenges and limitations that have kept gold tokens as a niche segment:

• 1. Price Volatility vs Fiat: By design, a gold-backed token’s price is as volatile (in USD terms) as gold itself. While gold is less volatile than, say, equities or Bitcoin, it still fluctuates – sometimes significantly. For example, in 2025 gold swung from around $2,600 to $3,500 (a ~35% range) over months. This volatility means gold tokens are not “stable” in the way that USDT or USDC (pegged 1:1 to $1) are. Businesses and users who need a predictable unit of account for transactions overwhelmingly prefer fiat stablecoins. Gold is a store of value, not a stable unit of account in everyday terms. Thus, gold stablecoins are mainly attractive for investment and hedging, rather than as a replacement for dollars in commerce or DeFi. In DeFi, borrowing and lending often need stablecoin collateral to avoid large swings – dollar tokens fulfill this better than gold tokens. As one analysis noted, PAXG priced around $3,350 “feels expensive and less intuitive” to average users compared to a simple $1 stablecoin. The unit bias (one PAXG = thousands of dollars) might psychologically reduce its usage for small-scale transactions, even though fractional ownership is possible.
• 2. Redemption & Operational Friction: Gold’s physical nature imposes operational complexities. Handling physical metal – storage, insurance, transport – is costlier and slower than dealing with bank accounts for fiat. While token issuers shield users from most of these logistics, they manifest in certain frictions: large minimum redemptions, required KYC for direct conversions, and potential delays (e.g., if someone does redeem for physical, it’s not instant – it involves logistics). Fiat-backed stablecoins, on the other hand, benefit from the highly liquid and electronic nature of cash and equivalents. Redeeming USDC for USD is as simple as a bank transfer that can be done for low fees and in almost any amount. Redeeming XAU₮ for gold involves a Brinks truck if you actually take delivery in Switzerland! This means gold stablecoins can’t fully replicate the seamless experience of fiat stablecoins. Moreover, the cost of carry for issuers is higher – storing gold incurs expenses, which either have to be eaten by the issuer (viable if they make money elsewhere, like Tether does, or charge small fees like Paxos) or passed to users. So far, PAXG and XAU₮ have managed to keep fees low, but smaller projects struggled – for example, when CACHE Gold announced it was winding down, it cited the difficulty of scaling and sustaining the business on thin margins.
• 3. Liquidity and Network Effects: Money is a network effects game. Traders and crypto users want deep liquidity and acceptance. USDT became ubiquitous because everyone uses it – it’s a self-reinforcing cycle. Gold tokens, being less popular, suffer thin order books on many exchanges (except the top ones). This deters large traders from using them, as slippage can be high. And without traders and arbitrageurs, the liquidity doesn’t improve. It’s a bit of a chicken-and-egg situation. The fact that gold tokens are spread across a dozen smaller offerings in addition to the main two also fragments what could be a unified liquidity pool. However, as of 2025, we do see consolidation of interest around PAXG and XAU₮. If one or both were to get listed on every major exchange and achieve multi-billion market caps, that might change the game. But they still face competition from another asset that’s considered “digital gold” by many in crypto – Bitcoin. BTC itself is seen by some as serving a similar role (inflation hedge, non-fiat store of value) but with the advantage of being native to crypto and far more liquid. While Bitcoin and gold appeal to different audiences, it is true that in crypto bear markets, many turn to stablecoins or BTC, not necessarily gold tokens. So gold stablecoins must carve out their unique value proposition to grow their network effect.
• 4. Regulatory and Custodial Trust: Ironically, the strengths of gold-backed stablecoins – audited reserves and regulatory compliance – can limit their growth. Because these tokens represent real-world assets, they fall under securities or commodity regulations in many jurisdictions. Issuers must carefully comply, which can slow down innovation or global reach. For instance, an entirely decentralized or algorithmic stablecoin can be permissionless and global (though with other risks), but a gold token must ensure the gold stays secure and legal. Some projects like VNX and PMGT took very compliance-heavy approaches, which made them solid but slow-moving, unable to do flashy yield farming incentives or aggressive marketing that purely crypto projects do. Additionally, holders have to trust the issuer and custodian – there is a degree of counterparty risk. While audits mitigate this, some hardcore crypto users are philosophically less interested in any asset that requires trusting a centralized vault. This narrows the audience to those who are comfortable with a Paxos or Tether holding their gold. Broader education and transparency help; to date, PAXG and XAU₮ have managed to avoid any incidents that would shake trust. If that record continues, over time more users may become comfortable. But any hint of mismanagement (like if an audit failed or redemption was halted) could greatly undermine confidence, given that holders can’t themselves verify the gold beyond trusting the attestations.
• 5. Competition from Traditional Gold Products: Gold-backed tokens aren’t only competing with crypto stablecoins; they also compete with well-established traditional gold investments. Products like the SPDR Gold Trust (GLD) ETF or physical gold coins/bars are the default choices for many gold investors. For a crypto user, tokens are convenient, but for a typical investor, buying an ETF through a brokerage is very easy and liquid too. Gold ETFs have massive liquidity (GLD trades ~$1–2 billion a day) and are integrated into traditional financial infrastructure. Some big institutions that wanted gold exposure in 2025 simply piled into ETFs – evidenced by the nearly 400 ton increase in ETF gold holdings in H1 2025 – rather than diving into crypto tokens. The tokens need to offer something extra to lure that capital. They do have advantages: 24/7 trading, ability to self-custody (no broker needed), and use in DeFi, which ETFs can’t match. These are significant in the crypto context, but bridging the gap to mainstream finance will take time. It may come as more traditional platforms start supporting tokenized assets (for example, if one day a major bank lets customers choose between ETF gold and tokenized gold in their app).
• 6. Cultural and Educational Factors: Gold-backed stablecoins straddle two worlds – the crypto world and the gold bug world. There is a need for education and trust-building on both sides. Crypto natives need to appreciate the value of a stable asset that isn’t pegged to fiat, and gold investors need to get comfortable with blockchain-based ownership. In 2025, we see younger, tech-savvy investors are more open to tokenized gold, while older gold aficionados might distrust “crypto.” Conversely, some crypto folks prefer Bitcoin or decentralized assets to something backed by traditional vaults. Overcoming these perceptions requires time, education, and perhaps positive examples of usage (like success stories where, say, a family in an inflation-hit country preserved wealth with gold tokens, or a DeFi platform made good use of tokenized gold with no issues).

The upshot is that gold stablecoins, while fundamentally sound, have not yet achieved the simplicity and ubiquity that dollar stablecoins enjoy. As one analysis succinctly put it: “Gold-backed tokens lack the simplicity and fluidity that crypto users expect”. Moving stablecoins and deploying them in DeFi has become second nature to many – doing the same with a gold token is still a novelty. However, the environment of 2025 is also demonstrating why these tokens matter. With high inflation and geopolitical uncertainty, the case for owning gold is strong, and doing so in a digitized form has clear advantages for liquidity and accessibility.

Outlook: The Future of Tokenized Gold

The enduring appeal of gold during uncertain times is on full display in 2025. What’s fascinating is how this centuries-old asset is now intertwined with cutting-edge blockchain tech. Gold-backed stablecoins like XAU₮ and PAXG show that it’s possible to marry the traditional safe haven with modern financial rails – and there is genuine market demand for this marriage. Looking ahead, several trends could shape the trajectory of tokenized gold:

• Continued Growth alongside Physical Gold: As long as macro conditions continue to favor gold (central banks buying, investors hedging inflation and volatility), the value backing these tokens will rise. If gold breaks further records – some analysts foresee $4,000 or higher in coming years under certain scenarios – the market caps of PAXG, XAU₮, and peers will naturally increase even without new token issuance. More interestingly, if even a small fraction of the ETF or physical gold market diversifies into crypto tokens, it could multiply the token market size. At ~$1.7 billion combined, gold stablecoins are a drop in the bucket of the ~$13 trillion gold market. There is significant room to grow if they can attract more gold investors to the concept.

• Wider Adoption in Crypto Ecosystems: The efforts by Tether’s USDT0 network to bring XAU₮ cross-chain and even into Telegram’s wallet are signs of a push for mainstreaming. If millions of Telegram users get exposed to a “digital gold” button in their app, that could spur adoption, especially in regions with volatile currencies. We might see gold tokens used more in remittances and cross-border transfers as well. Gold is a neutral asset – sending someone PAXG is like giving them a piece of universal value, which might appeal in certain situations (for example, sending funds to someone in a country where you don’t trust the currency or banking). Additionally, should DeFi protocols on various chains integrate gold tokens for lending, borrowing, or as reserve assets for decentralized stablecoins, it could cement their utility in the crypto finance stack. MakerDAO’s use of PAXG is a prime example; others may follow.

• Institutional and Corporate Use Cases: We may also see more institutional utilization. For instance, a crypto treasury for a DAO or company might allocate some portion to tokenized gold to stabilize their assets. Some stablecoin issuers could consider partially gold-backed stablecoins (like Tether’s Alloy project hinting at multi-asset backing). Even central banks or sovereign funds, in an effort to experiment with blockchain, might tokenize a small part of their gold reserves for easier management or as collateral for digital transactions. This is speculative, but not implausible as governments explore CBDCs and asset tokenization – gold could be one of the first assets they trial, given its importance.

• Competition and New Entrants: The landscape will likely see new entrants, possibly including big players. For example, if a major bank or commodity trading firm launched its own gold token with high backing credibility, it could shake up the market. So far, the likes of JPMorgan or Goldman haven’t issued gold stablecoins for public trading, but companies like Mitsubishi and some Swiss banks have piloted gold token platforms internally. Moreover, existing projects might innovate: Paxos or Tether could enhance their offerings (maybe offering smaller physical redemptions via partnerships, or integrating tokens with gold e-commerce). We also might see hybrid tokens (like the mooted Alloy) that blend gold with fiat or other assets to create new types of stable-value coins.

• Regulatory Outlook: With the implementation of clearer crypto regulations (e.g., MiCA in Europe categorizing asset-referenced tokens, or discussions in the US around stablecoin laws), gold-backed tokens might receive more explicit legal status. This could be a double-edged sword: positive regulation could encourage more participants (if, say, it’s easier to list or use gold tokens within compliant frameworks), but onerous regulation could constrain them. However, given gold tokens are fully asset-backed and involve real assets, regulators might view them more favorably than unbacked crypto. It’s notable that Dubai’s VARA and other crypto-friendly jurisdictions have mentioned gold tokens as examples of permissible asset tokens, which could boost projects like CGO or global trading of these assets.

• Integration with Traditional Gold Markets: Over time, the line between a “crypto gold token” and traditional gold could blur. We might see gold refiners and mints directly issuing tokens upon production of a gold bar, such that the bar is born digital. Gold trading platforms (like gold refineries, bullion marketplaces) could adopt blockchain tokens as settlement instruments. If LBMA or CME (which runs the major gold futures market) were to incorporate tokenized gold in settlement, it would greatly legitimize the concept. These are longer-term possibilities, but the technology is in place – it’s more a matter of industry consensus and standards.

For now, in 2025, gold-backed stablecoins remain a small but growing corner of the crypto worldF, thriving on the back of gold’s strong performance. They provide an important diversification option for crypto investors – a way to park value in an asset that is historically resilient, without leaving the digital asset ecosystem. As one crypto journalist observed, “physical gold and its digital counterpart remain favorites during macroeconomic storms”. When the seas of the economy get rough, many seek shelter in gold, and now one can do so with a few clicks on a blockchain.

In closing, the rise of XAU₮, PAXG, and their ilk exemplifies the broader trend of asset tokenization: bringing real-world assets onto distributed ledgers. This bridging of old and new finance offers compelling benefits – enhanced liquidity, around-the-clock markets, fractional ownership, and global accessibility – while leveraging the stability of proven assets. Gold, with its 5,000-year history as a store of value, has found a new medium in the 21st century. The year 2025 has shown that even as cryptocurrencies seek to redefine money, there is room and respect for the ultimate hard money in digital form. Gold-backed stablecoins are likely to remain a fixture of the crypto landscape, especially if economic uncertainty persists. They stand as a reminder that innovation in finance doesn’t necessarily mean discarding the old – sometimes it means