WGC Proposes Tokenization of Gold in Decentralised Finance Ecosystems

 Chennai: The World Gold Council has proposed the Standard Gold Unit (SGU) concept - digital gold that separates the monetary value of gold from the physical asset and creates tokenized gold in decentralised finance ecosystems.

The advent of new technologies, including blockchain, decentralised finance (DeFi) and cryptocurrency is having a transformational effect on the financial markets that gold operates in. A new age of easily accessible, yield-bearing digital assets puts traditional assets under the spotlight, potentially disrupting their financial status. But at the same time, these innovations create previously unimaginable opportunities for gold to thrive as the ultimate physical and digital asset.

The results could be game-changing for the gold industry, increasing trust in gold markets, and recreating the metal as a fungible and highly liquid digital asset capable of powering the financial markets of the future, finds a study by WGC.

Tokenised gold in DeFi ecosystems can create digital gold products that promise regular yields, albeit with additional risks added to the investment. Tokenization could create the ability for institutional and retail investors to use tokenized gold for staking, borrowing, or liquidity provision in DeFi.

Regulated On-chain Traditional Finance explores how regulatory and legislative changes could open the door for traditional finance companies that are already using private blockchains to become more comfortable participating in DeFi protocols, potentially involving tokenized gold.

Tokenized Gold Funds look at how tokenized gold funds could democratise access to gold investment and open up new opportunities to raise capital from holding physical gold.

Mature DeFi Gold can consider a more mature, future DeFi space, where conservative yield-bearing gold options might allow investors to enjoy small yields on their gold assets that come with a lower level of risk.