Tokenized Gold's DeFi Adoption Falls Short Despite Record Trading Volumes

Tokenized gold has been gaining attention this year due to increasing physical bullion demand and record-breaking gold prices. However, a new report from RedStone suggests that despite its growing popularity, only a small portion of tokenized gold is being used in decentralized finance (DeFi) lending.

The report points out that while tokenized gold saw high activity in spot markets with $90.7 billion in Q1 trading volume, DeFi adoption remains thin with just $63 million in XAUT and PAXG being used on Aave v3 and Morpho. This represents roughly 1.5% of the tokens' combined $4.2 billion market capitalization.

RedStone's data suggests that tokenized gold can function reliably as DeFi collateral during market volatility, citing an instance where Aave processed its largest cluster of XAUT liquidations on March 23 without disruption during a sharp gold sell-off.

The report highlights the mismatch between trading interest and productive DeFi usage, with the amount actually locked or committed to decentralized lending staying relatively small. This raises questions about whether tokenized real-world assets can translate from 'tradable exposure' into 'composable financial infrastructure'.