Gold-backed crypto tokens are gaining traction, and other token-backed commodities may soon follow, a blockchain research firm says.

Arcane cites Tether Gold and Pax Gold as the two gold-backed tokens that have had some success.

Coingecko listed Tether Gold (XAUT) as the No. 181 crypto on Wednesday, with a market cap of US$410 million.

Pax Gold (PAXG) was No. 193 with a market cap of $361 million.

(The Perth Mint also has its own gold token, but it appears to be only be traded on the Sydney-based Independent Reserve. Coingecko lists it as the No. 2016 crypto with a market cap of just $1.8 million.)

Arcane said that overall the market cap of gold-backed tokens has risen 360 per cent since the beginning of 2021, while the overall crypto market has grown just 150 per cent.

“Tokenised gold vastly improves gold’s liquidity by enabling investors to own fractionalised parts of physical gold bars,” Arcane said.

Unlike with a gold ETF, investors own specific parts of an allocated physical gold bar, Arcane said.

Other groups have tried to launch tokens backed by commodities other than gold, such as silver and palladium, but they haven’t yet been been successful.

Last week the Bank of Russia announced that Atomize LLC, a subsidiary of Russian smelting giant Nornickel, had been granted a licence to be able to issue digital assets. The plans to sell tokens backed by palladium, cobalt and copper on the Hyperledger Fabric blockchain.

“It will be interesting to see how that plays out,” Arcane said.

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