Tokenization of precious metals

The tokenization of precious metals consists of representing, in digital tokens registered on a blockchain, the right over a physical metal (gold, silver, platinum or palladium) held in custody.

Each token:

• is backed by a specific amount of physical metal
• stored in professional custody
• verifiable through audits

Tokenization vs traditional physical possession

Unlike physical bars or coins:

• does not require logistics or transport
• allows extreme fractionalization (for example, 0.1 g of gold)
• facilitates digital transmission and management

Tokenization vs metal ETFs

Compared to ETFs:

• the token evidences the right granted by the deposit agreement and the issuance terms, typically the right to withdraw a set quantity of metal
• shifts the intermediaries: instead of a fund manager you have the issuer, the vault operator and the auditor certifying the holdings
• allows almost immediate settlement and transfer, provided there is a counterparty

That right is set by the contract, not by the on-chain record: ownership of movable property requires a contract plus delivery, and where the metal is held on a fungible basis the holder may have a claim against the custodian rather than title to a specific bar (Arts. 609 and 1095 of the Spanish Civil Code, BOE-A-1889-4763).

Tokenization is widening access to precious metals.

For the investor

Transfer with no market hours

Tokens can be transferred and managed without relying on traditional market schedules. Real liquidity depends on there being a counterparty: the on-chain record does not create it.

Accessibility and fractionalization

It allows investing in small quantities of metal, which is not feasible in the traditional physical market.

Professional custody without logistical friction

The metal is stored in professional vaults, without transportation or individual custody costs.

Transparency and traceability

The physical backing and chain of custody can be audited periodically, providing real trust.

For the issuing company (mining companies, refineries, fintechs)

Access to global capital

Tokenization opens up the product to international investors without classic banking friction.

New digital financial product

It allows you to create innovative savings, investment or coverage solutions.

Operational automation

Smart contracts allow you to automate distribution, rewards or economic rights.

Efficiency and scalability

It changes how intermediaries are distributed and reduces administrative costs and settlement times.

PAX Gold (PAXG) — Tokenized Gold

A well-known example is PAX Gold, by Paxos: an ERC-20 token backed by gold held in custody in London. It is cited as a design reference, not as a recommendation; before replicating the model in the European Union you need to check which MiCA regime would apply to it.

According to its issuer, each token carries a right to one ounce of gold held in custody, subject to periodic audits: the token is the record of the right, not the metal.

Fintechs and savings apps in digital gold

A fintech can launch an app that allows:

• save in tokenized gold
• Buy minimum fractions
• operate with audited backing and on-chain traceability

This type of product targets retail clients, which raises the disclosure and marketing-communication requirements and shapes the design from day one (Regulation (EU) 2023/1114).

Mining and refineries

Extractive companies can:

• tokenize rights over future production
• finance new projects
• diversify ways of raising capital

Depending on how it is structured, tokenizing future production can amount to a transferable security or to a commodity derivative, and it then falls under securities law (Annex I Section C of MiFID II and Arts. 6 to 8 of Law 6/2023 (LMVSI), BOE-A-2023-7053).

Investment and Equity Funds

Tokenized metals allow:

• diversification with exposure to metals without physical logistics
• integration into digital wallets
• exposure to commodities without operational friction

This is where the real trust of the system.

Blockchain used

The most used networks are:

• Ethereum for their security and maturity
• EVM Compatible as Polygon or Arbitrum, because of its speed and low costs

The choice depends on volume, regulatory profile and business model.

Physical custody of metal

Physical backing is key. Common models include:

• custody with first-level third parties
• certificates of deposit in vaults
• regular independent audits

Without professional custody and audits, there is no credible tokenization.

Smart contracts and standards

The technical structure follows from the prior classification, not the other way round. A token that only grants the right to withdraw the deposited metal is not a regulated financial product; one that shares proceeds, promises a return or represents debt is, and MiCA then stops applying (Art. 2(4) of Regulation (EU) 2023/1114).

The ERC-1400 and ERC-3643 standards are used where transfers must be restricted to identified holders, which is common in the second case:

• ERC-1400
• ERC-3643

These contracts allow:

• Control issuance and transfers
• integrate KYC/whitelist
• define governance and compliance rules

This is where technical expertise makes the difference.

The applicable framework depends on what the token represents, not on the technology. If it carries rights typical of a regulated financial product, securities law applies: MiFID II and the LMVSI. MiCA is then out of scope. If it does not, MiCA applies, and a token tracking the value of the metal will usually fall under the asset-referenced token regime, which requires prior authorization of the issuer. Two separate and mutually exclusive regimes, not one (Art. 2(4) of Regulation (EU) 2023/1114 and Arts. 6 to 8 LMVSI, BOE-A-2023-7053).

If the token is designed to track the value of the metal, its issuer needs prior authorization before offering it to the public, together with prudential supervision and an asset reserve. It falls outside that regime only where the issuance stays below the thresholds set in the Regulation or is addressed solely to qualified investors (Arts. 3(1)(6) and 16 of Regulation (EU) 2023/1114).

The applicable regime:

• protects the investor
• requires transparency from issuers
• reinforces the legitimacy of the sector

Far from being an obstacle, it is a competitive advantage for serious projects that want to operate with legal certainty and institutional trust.

How do we develop your project at Unknown Gravity?

At Unknown Gravity we act as a comprehensive technology partner, not as a one-off supplier.

Strategic and legal consulting

• feasibility analysis
• business model design
• regulatory fit: asset-referenced token under MiCA or tokenized security under the LMVSI, depending on the rights the token carries

Technical design of the asset

• blockchain architecture
• token design
• definition of smart contracts

Development and auditing

• secure programming
• smart contract auditing
• robustness tests

Implementation and launch

• deployment of the platform
• technical support
• post-launch support

This content is for information purposes. It is not legal, tax or investment advice and does not replace consulting a professional. Regulation on tokenization and crypto-assets keeps evolving: check the current version of the rules cited on BOE and EUR-Lex.