Gold Tokens Reach $3.9B Market Cap as CZ Warns They Are ‘Trust Me Bro’ Assets

Despite gold prices retreating from all-time highs to around $4,100 per ounce, tokens pegged to the metal are gaining traction in crypto markets. The total market capitalization of gold tokens has climbed to roughly $3.86 billion, driven by strong performances from XAUT ($4,144) and Paxos Gold (PAXG), according to CoinGecko.

However, Binance co-founder and former CEO Changpeng Zhao (CZ) cautions that these tokens are only as reliable as the promises backing them.

“Tokenizing gold is NOT ‘on-chain’ gold,” CZ wrote on X. “It’s tokenizing that you trust some third party will give you gold at some later date, even after their management changes, maybe decades later, during a war, etc.”

The dependence on centralized issuers to deliver physical gold under uncertain conditions raises concerns similar to those facing stablecoins, whose value is typically pegged to currencies such as the dollar.

A recent report from NYDIG noted that even dollar-pegged stablecoins like USDC and USDT can break their pegs under extreme market stress, highlighting that the term “peg” does not imply an absolute guarantee. During the recent $500 billion crypto sell-off, Ethena’s USDe briefly dropped to $0.65 on Binance, while USDC and USDT remained above $1.

Tokenized gold, while attractive as a hedge, may carry similar hidden risks.

“It’s a ‘trust me bro’ token,” CZ added. “This is the reason no ‘gold coins’ have really taken off.”

Even the largest gold token, Tether Gold (XAUT), has a market cap of $2.1 billion, modest compared with its dollar-pegged counterpart USDT, which sits at $183 billion.