Tokenized gold is surging past multibillion-dollar valuations, yet less than two percent of those digital assets actually secure onchain loans or settle payments, CryptoNews reported.
Buying isn’t the same as using. That underlying tension defines the current market trajectory for bullion-backed tokens.
Circulating supply for Paxos Gold ($PAXG) more than doubled from approximately 198,000 tokens at the end of November 2024 to roughly 448,000 in 2026. Over that same window, gold prices jumped over 50 percent from roughly $2,660 per ounce to $4,030.
Roughly two-thirds of that market value expansion came from newly minted tokens rather than raw commodity appreciation. Yet Huynh argued that spot trading volume hitting $90 billion in the first quarter of 2026 simply reflects price speculation that investors can already execute via traditional ETFs.
“Buying isn’t the same as using,” Huynh said, telling CryptoNews that the true measure of adoption is what holders actually do with their tokens.
Collateral Depleted in DeFi
Decentralized finance protocols reveal a stark utility bottleneck. Huynh pointed to estimates showing only about $63 million worth of $PAXG and Tether Gold (XAUT) deployed as collateral across Aave and Morpho. That represents roughly 1 percent of their combined $4.9 billion market capitalization.
“Genuine adoption is when the token does something a bar in a vault can’t: secure a loan, settle a payment, or be earned through activity,” Huynh told CryptoNews. “That part is still at an early stage.”
Traditional exchange-traded funds continue to dwarf onchain alternatives on raw distribution. The SPDR Gold MiniShares Trust (GLDM) commands approximately $31 billion in assets while charging an annual expense ratio of 0.10 percent. Meanwhile, $PAXG levies no ongoing storage fees, yet captures a much smaller asset base.
Huynh emphasized that being cheaper is not enough to displace entrenched legacy instruments. Distribution, cost, and utility remain the three determining vectors for capturing the wider digital gold market, which the World Gold Council estimates could scale to $170 billion by 2031.
The Immutable Trust Gap
Blockchain rails provide absolute transparency for ledger transactions, but they cannot independently verify physical asset integrity. Research from the World Gold Council shows nearly four in five investors still prioritize traditional trust in a digital gold custodian before committing capital.
“A blockchain proves what happened on the ledger,” Huynh said. “It can’t prove what happened off it.”
Physical redemption barriers further restrict everyday retail participation. Paxos requires a minimum redemption threshold of 430 $PAXG plus associated fees, pricing out smaller holders. Huynh said that the industry’s ultimate goal must focus on minimizing intermediary reliance rather than pretending distributed ledgers eradicate offchain counterparty risk entirely.
“Blockchain’s job is to make those safeguards cheaper and faster to check, not to replace them,” Huynh said to CryptoNews.
Xash Links Gold Accumulation to Solana-Based Stablecoin Activities
Mainstream payment integration scales differently outside Western markets. Digital gold purchases via India’s Unified Payments Interface reached 254 million transactions in March 2026. Indonesia’s Pegadaian Tring app has similarly onboarded over 6 million users.
To bridge the Western utility gap, Xash has introduced a rewards model linking gold accumulation to stablecoin activities on Solana-based DeFi platforms. Users earn gold fractions by participating in liquidity provision and lending, bypassing direct token purchases.
Whether this mechanism solves long-term retention issues remains an open question across decentralized markets. Past liquidity mining schemes routinely suffered user churn the moment temporary token emissions ceased. Huynh suggested that rewarding users with a long-term asset like gold could alter participant behavior, though consistent retention data is still pending.
“New demand for gold doesn’t depend on anyone deciding they want exposure to the gold price,” Huynh told CryptoNews. “It depends on how much people want to use stablecoins.”
