Binance's CZ Raises Concerns About the Authenticity of Tokenized Gold

Binance Founder CZ Says Tokenized Gold Isn’t Truly ‘On-Chain’ — And It’s Stirring Debate

A significant debate has erupted in the cryptocurrency world after Changpeng “CZ” Zhao, the founder of Binance, expressed skepticism about the status of tokenized gold as being authentically “on-chain.” His comments came following an announcement by Peter Schiff, a gold advocate and Bitcoin critic, who plans to launch a new blockchain-based tokenized gold platform. As interest in gold grows in traditional markets, discussions about its tokenized versions in cryptocurrency are intensifying.

Key Takeaways

CZ argues that tokenized gold does not truly operate on-chain, as it relies heavily on trust in third-party custodians.
Peter Schiff promotes a new platform allowing digital ownership of gold with easy transfer and redemption options.
Despite rising market capitalization for gold-backed digital assets, questions remain about whether these assets can genuinely be classified as “on-chain.”
The tokenized gold market is seeing increasing interest and participation, with over 150,000 holders currently involved.

The Gold Debate: CZ's Perspective vs. Schiff's Vision

In a recent interview, Peter Schiff explained his vision for a platform that would enable users to purchase gold via an app, store it securely in vaults, and transfer ownership digitally or even redeem it for physical gold. He stated, “Ideally, the one thing that makes sense to put on a blockchain is gold. You can use tokenized gold as a medium of exchange, a unit of account, and a store of value.” His new initiative, launching under Shift Gold, aims to facilitate instant transfers and redemptions to promote a stable digital asset linked to physical gold.

However, CZ quickly chimed in on X (formerly Twitter), questioning the validity of such tokenized gold as being genuinely on-chain. He stated, “Tokenizing gold is NOT ‘on-chain’ gold. It’s tokenizing that you trust some third party will give you gold at some later date — maybe decades later, during a war, or after management changes, etc. It’s a ‘trust me bro’ token.” He suggested that such mechanisms explain the slow uptake of gold coins in the digital asset arena.

The discourse between these two leaders occurs amid the surge in tokenized gold markets, with October 7 marking a significant milestone when the combined market cap of gold-backed digital assets surpassed $3 billion, currently resting at over $3.75 billion.

Market Trends in Tokenized Gold

Gold-backed tokens, including Tether Gold (XAUT), PAX Gold (PAXG), and Kinesis Gold (KAU), have been at the forefront, closely mirroring the rise in spot gold prices, which recently exceeded $4,000 per ounce — a record high.

Market Activity in Tokenized Gold

Trading volume for these assets reached $640 million within 24 hours, as investors sought safe havens due to ongoing U.S. government shutdowns and global economic uncertainty. According to data from rwa.xyz, the tokenization of real-world assets (RWA) has continued to grow, with the total on-chain value exceeding $34 billion.

Growth of Tokenized Assets

Among this total, tokenized commodities led by gold now make up over $3.5 billion, reflecting a 36% increase in just one month. Tether Gold and PAX Gold maintain significant market standings, with capitalizations of approximately $2.1 billion and $1.3 billion, respectively. However, CZ's comments raise concerns about the authenticity of these assets’ decentralization.

Are Tokenized Gold Assets Truly Decentralized?

Tokenized gold provides holders with digital representations of actual gold, usually linked to specific weights like a troy ounce or gram. Unfortunately, the physical gold is typically stored off-chain in centralized vaults.

Issuers like Paxos and Tether leverage smart contracts to create tokens based on gold reserves, providing audit and redemption options. However, as CZ noted, this arrangement necessitates third-party custodians to maintain and verify the gold reserves.

This means that while token ownership is recorded on the blockchain, the actual gold remains off-chain. Each transaction hinges on trusting that the issuer indeed has and responsibly manages the corresponding physical gold, a system that some critics argue conflicts with the fundamental principles of decentralization.

To have fully on-chain tokenized gold, both the digital representation and the ownership transfer must happen without intermediary custodians, which poses significant technical and logistical hurdles since physical gold cannot exist natively on a blockchain. Even the most transparent issuers still engage within conventional financial systems reliant on regulated vaults and audit firms.

Growth in Tokenized Gold Holders Amid Increased Activity

Nonetheless, the tokenized gold sector continues to expand rapidly. Recent market data indicates that over 150,000 individuals now own tokenized gold, with more than 20,000 active addresses engaging with these tokens in the last month.

Token Holders Growth

Source: RWA.xyz

The monthly transfer volume for tokenized gold has surpassed $8.6 billion, reflecting rising interest from both retail and institutional investors.

Recent developments indicate that major industry players are reinforcing their commitments. Earlier this month, Tether and crypto lending firm Antalpha — associated with Bitcoin mining titan Bitmain — raised at least $200 million for a new digital asset treasury, primarily focused on XAUT.

This venture aims to establish a public treasury that exclusively holds tokenized gold, potentially enhancing its liquidity and prominence within the RWA market.

Gold's rally in traditional markets has further intensified interest in tokenized gold, with prices hitting $4,035 per ounce due to concerns surrounding a prolonged U.S. government stalemate and dwindling fiscal confidence.

Even after a brief correction following a $2 trillion market cap drop, gold remains roughly 30% higher since April. Analysts attribute this upward trend to various factors such as former President Trump’s trade policies, a weakening dollar, and strong demand for safe-haven assets—conditions also conducive for tokenized gold as a digital link to traditional assets.