Can Tokenized Gold Outshine Stablecoins as the Preferred Savings Tool in Emerging Markets?

Tokenized gold is swiftly gaining popularity, with its market value surpassing $4 billion. This new financial model shows great potential, particularly in emerging markets affected by currency fluctuations and economic instability. By combining traditional gold assets with blockchain technology, tokenized gold can provide accessible savings options, promoting financial inclusivity.

Key Takeaways

The market for tokenized gold products is growing rapidly, currently valued at over $4 billion.
Emerging markets are seeing increased adoption of tokenized gold as a savings tool amid economic challenges.
Tokenized gold products, like PAX Gold and Tether Gold, support investment without the need for significant capital.
Collaborative efforts, such as GSX with Ubuntu Tribe, aim to enhance gold-backed investment products across different regions.
Regulatory challenges and educational gaps could hinder the growth of tokenized gold in some areas, though some nations are creating favorable frameworks.

Tokenized Gold

Tokenized Gold's Rise in Emerging Markets

Tokenized gold is quickly becoming a valuable asset class, as indicated by data from CoinGecko, which shows the market now exceeds $4 billion. The growth trajectory suggests even greater expansion in future years. While interest is rising among both retail and institutional investors, it's the emerging markets that are likely to lead the charge in adopting digital gold amid ongoing currency depreciation, high inflation, limited banking access, and economic uncertainties. By integrating gold with blockchain technology, tokenized gold is transitioning from a niche innovation to a vital financial resource.

Products like PAX Gold (PAXG) and Tether Gold (XAUt) enable individuals to save, invest, and protect wealth without needing substantial capital or conventional bank accounts. This model presents an accessible storage solution for value, fostering wider financial inclusion in developing economies.

Initiatives to Promote Tokenized Gold

Several digital asset platforms are actively working to introduce gold-backed savings and investment options to targeted regions. For example, Global Settlement Holdings Inc. (GSX) announced a partnership on December 10 with digital finance company Ubuntu Tribe, aiming to bring over $5 billion worth of gold onto the blockchain. This collaboration will build upon Ubuntu Tribe’s GIFT token, which is fully regulated and MiCA-compliant.

According to Ryan Kirkley, CEO of GSX, the partnership will develop an interoperable digital asset and payment framework designed to minimize reliance on slow correspondent banking. Current fees for sending $200 to Sub-Saharan Africa can average around 8%, and one-third of cross-border retail payments take longer than a day to settle.

Kirkley explained, "The framework we are building with Ubuntu Tribe will significantly enhance settlement speeds and lessen foreign exchange friction for SMEs, exporters, and diaspora communities."

Utilizing Tokenized Gold for Currency Swaps and Liquidity

Mamadou Kwidjim Toure, CEO of Ubuntu Tribe, revealed to Cryptonews that their platform allows fractional ownership of gold, starting from just 1 gram, enabling mobile access to regulated and auditable gold. The tokenized gold is stored in a secure "Utribe Wallet" that connects users to gold-backed savings, stablecoins, and decentralized finance options.

"We have already surpassed $10 million in transaction volume, with continued growth anticipated," Kwidjim Toure noted.

GSX's stablecoin (SDGX) and a universal stablecoin framework are set to facilitate instant foreign exchange swaps and liquidity pools, aiming to shorten settlement times from days to seconds for businesses and remittances from diaspora communities.

In the next year, a pilot program will be launched to test gold traceability and establish a cross-border foreign exchange corridor, with plans for integration into regulated sandbox environments in key African markets.

Daniel Ahmed, COO and co-founder of crypto banking platform Fasset, highlighted the growing trend of allocating a portion of salaries into tokenized gold to safeguard against currency depreciation and diversify income.

"This infrastructure also enables overseas workers to convert earnings into tokenized gold and send it across borders in a single transaction—a feat that banks and gold ETFs struggle to match in terms of cost and speed," he affirmed.

Tokenized Gold as a Preferred Savings Method

Ahmed pointed out that data from Fasset shows some users in certain Asian countries receive their salaries in stablecoins, which are then immediately converted into tokenized assets as part of their saving practices.

The adoption of this model is further illustrated by initiatives like MiniPay, developed by the Opera browser in collaboration with The Celo Foundation, stewards of the Layer-2 Celo blockchain. MiniPay allows users to conduct stablecoin transactions with ease and has recently incorporated support for XAUt0, the omnichain implementation of Tether Gold. This development enables users to move beyond conventional stablecoins to gold-backed real-world assets.

"As we launched XAUt0 in MiniPay, we observed demand surge, particularly among users from Sub-Saharan Africa, with more than 30,000 registrations in just weeks," remarked Rene Reinsberg, Celo's co-founder and President of Celo Foundation.

He emphasized that MiniPay users leverage XAUt0 for savings rather than merely transactional purposes. "While stablecoins serve both sending and saving functions, gold is primarily considered a savings medium," he explained. "This offers users a chance to diversify their holdings away from US Dollar-denominated stablecoins and provides a hedge against hyperinflation by facilitating easy transitions into XAUt0."

Challenges Ahead: Education and Regulation

Despite the evident increase in tokenized gold usage in emerging markets, regulatory uncertainties and educational barriers might present obstacles for growth.

Yaroslav Patsira, a fractional director at cryptocurrency exchange CEX.IO, mentioned that regulatory ambiguity remains a significant challenge. Different countries classify tokenized gold diversely, leading to difficulties for businesses operating internationally and for investors in understanding their rights.

He also pointed to custodial risks, as acquiring tokenized gold means relying on a third party to store the physical gold, creating trust issues for users.

Moreover, the lack of industry standards complicates the comparison of different tokenized gold products, making it harder to identify reliable options.

Conversely, Patsira indicated that certain African regulators are showing increased openness towards tokenized commodities such as gold as opposed to cryptocurrencies. Nations like Kenya, Nigeria, and South Africa are working to establish specific frameworks for digital assets, with regulators favoring tokens backed by real-world assets, which might align better with existing financial regulations. As these regulatory frameworks evolve and become standardized across borders, the barriers to adoption could progressively diminish.