Tokenized gold's rapid market expansion has not translated into meaningful adoption within decentralized finance, according to Kevin Huynh, CEO of Xash. While spot trading volumes reached $90 billion in the first quarter of 2026, with PAXG and XAUT commanding over 90% market share, Huynh argues that trading volume alone does not indicate practical blockchain utility.
According to the World Gold Council's 2026 Digital Gold Market Report, the tokenized gold market has grown fivefold since late 2024. However, Huynh points to a critical gap: only approximately $63 million worth of PAXG and XAUT is deployed as collateral on major DeFi lending platforms Aave and Morpho, representing roughly 1% of their combined market capitalization of approximately $4.9 billion.
Market Growth Outpaces Token Issuance
Huynh noted that PAXG's circulating supply more than doubled from approximately 198,000 tokens at the end of November 2024 to roughly 448,000 currently. Over the same period, gold prices rose from approximately $2,660 per ounce to $4,030, an increase of more than 50%. According to Huynh's analysis, approximately two-thirds of PAXG's market value growth came from additional token issuance, while rising gold prices accounted for the remaining third.
Blockchain Cannot Guarantee Physical Assets
Huynh identified a structural limitation of tokenized gold: blockchain technology cannot independently verify the existence, ownership, or recoverability of physical assets backing digital tokens. The World Gold Council found that nearly four in five investors want to trust a digital gold provider before committing funds, indicating that traditional custody concerns remain central to adoption decisions.
While blockchain enables verification of token issuance and transfers, it cannot replace independent audits, insurance arrangements, or legally enforceable ownership rights. Huynh noted that Paxos' physical redemption requirements involve a minimum of 430 PAXG plus fees, placing direct redemption beyond reach for many smaller investors.
Cost Advantages Insufficient Without Distribution
Huynh questioned whether tokenized gold's cost benefits are sufficient to attract mainstream investors. PAXG does not charge ongoing storage fees, while the SPDR Gold MiniShares Trust (GLDM), a low-cost U.S. gold ETF, charges an annual expense ratio of 0.10%. Despite this difference, GLDM holds approximately $31 billion in assets, substantially exceeding PAXG's market capitalization.
Huynh identified distribution, cost, and utility as the three factors likely to determine tokenized gold's market share. The World Gold Council estimates the broader digital gold market could reach $160 billion to $170 billion by 2031, including non-blockchain digital gold products. Huynh cited examples of digital gold services integrated into mainstream payment platforms, particularly in Asian markets, such as India's Unified Payments Interface, where digital gold purchases reportedly reached 254 million transactions in March 2026, and Indonesia's Pegadaian Tring application, which has attracted more than 6 million users.
Stablecoin Rewards as a Potential Path Forward
Xash has introduced a model rewarding users with gold for participating in activities such as stablecoin lending, liquidity provision, and trading on Solana-based DeFi platforms. Huynh believes this approach could address both limited practical use of tokenized gold and DeFi's difficulty retaining users after financial incentives expire.
Huynh suggested that stablecoin payment cards could eventually offer gold rewards on everyday purchases, creating demand among consumers with little interest in directly trading cryptocurrencies. He indicated that tokenized gold's next growth phase may depend less on bullion prices and more on its integration into everyday financial activity.
