Tokenized Gold Adoption Stalls Despite Record Trading Volume
Despite strong trading activity in tokenized gold, the asset's adoption as collateral in decentralized finance (DeFi) remains limited. According to a recent report by RedStone, only about $63 million worth of Tether Gold (XAUT) and PAX Gold (PAXG) is currently posted as collateral on Aave v3 and Morpho, roughly 1.5% of the combined $4.2 billion market capitalization of those tokens.
The report highlights a bottleneck in the use of tokenized gold in DeFi, where trading volume has surged to $90.7 billion in the first quarter, despite physical bullion reaching record levels. The resilience of tokenized gold under stress was demonstrated during a sharp downturn in gold on March 23, when Aave processed its largest cluster of XAUT liquidations without disruption.
RedStone notes that the adoption gap is not due to liquidity or reliability issues, but rather due to user demand and incentives for borrowing and leverage against tokenized collateral. The report emphasizes that scaling collateral adoption across protocols requires more than technical compatibility, and that proven resilience under stress scenarios does not guarantee automatic growth in collateral usage.
The main challenge for tokenized gold is now to bridge the gap between trading activity and DeFi adoption, as the sector continues to grow and commodity-driven volatility returns. The report suggests that access to tokenized assets through centralized channels may not necessarily translate into higher DeFi collateral usage, highlighting the need for further analysis of user behavior and incentives.