Crypto critic Peter Schiff recently announced his plan to launch a tokenised gold product.

Unlike digital assets like Bitcoin, Schiff asserted, tokens backed by physical assets, such as gold have enduring value: “Tokenizing real assets, to increase liquidity and portability, adds value. Tokenizing worthless strings of numbers does not”.

Depending on your perspective, Schiff’s analysis could sound reasonable or completely misses the point.

Former Binance CEO Changpeng Zhao took the latter view, insisting that tokenising gold doesn’t actually transform the asset into ‘on-chain gold’. The move, rather, is “a ‘trust me bro’ token”.

In other words, Zhao contends, Schiff’s proposal fails to achieve the ‘trustless trust’ that crypto advocates regard as one of the blockchain’s most important features. ‘Tokenised gold’, on this schema, represents a more old-fashioned variety of counterparty risk (for better or worse).

That logic is sound enough on its own terms, but one could extend the argument. The same story quotes a crypto advocate ‘expanding the argument to include custodial risks’, and citing “historical examples such as the 1933 Gold Confiscation, the 1971 closure of the gold window, and the 2023 LBMA delivery failures to illustrate the risks tied to third-party storage and management.”

Risk is not one-size-fits-all

The first of those examples – a reference to an emergency executive order banning gold hoarding – outdoes even goldbug paranoia. On this logic, even bullion is not immune to expropriation or systemic breakdown. Bitcoin, by contrast, promises immunity from such interventions, its security underwritten not by vaults or statute, but by cryptographic consensus.

But in the real world. risk management means making difficult choices. If you are worried about catastrophic financial mismanagement and runaway inflation, precious metal may be more to your taste. Physical gold will even retain its intrinsic form in many truly apocalyptic scenarios (Though, as S&P Global Head of Commodities and Real Assets Fiona Boal’s wryly notes, “gold bugs may tout holding physical gold as offering protection from a true black swan event, such as the complete collapse of a fiat currency, but there are legitimate questions regarding how practical a few gold bars would be in the aftermath of such an event.”)

But perhaps government overreach concerns you more. Decentralised finance is good for terrorists and money launderers, but as government policy becomes more erratic, the rest of us quite reasonably may wish to shield ourselves from the whims of executive power. Though sceptics may remind us that – as Paul Krugman put it  – “fiat currencies have underlying value because men with guns say they do.”)

The materiality of liquid assets

If part of the appeal of precious metals rests on their physical presence, and their real-world utility, then that very materiality implies operational consequences.

The recent short squeeze that upended the London silver market saw traders taking the unusual step of booking air cargo holds of silver from New York to London to profit from the premium across the Atlantic.

Gold is much more likely to earn frequent flier miles. Recently, we’ve seen gold shipments made at a much grander scale. A number of countries, including Poland, Nigeria and India have flown tons of gold for storage at home. At scale, these can be mammoth operations. In Poland’s case, they flew 100 tons of bullion from the Bank of England to sites across Poland, an operation involving hundreds of specially qualified employees.

Innovation vs tradition?

The advent of blockchain technologies and synthetic precious metal instruments raise complex conceptual questions about risk and value.

Fortunately for investors, tradition and innovation do not necessarily exist in opposition. As Finalto Asia’s Shane Tan observed, some of the most powerful uses of technology involve applying innovation to make traditional assets more adaptable, liquid and aligned with evolving market needs.

As Tan suggests, “innovation isn’t just about new assets, it’s about smarter solutions”.

At Finalto, we help our clients navigate evolving markets with innovative solutions for metals trading and a wide range of assets. Get in touch with Finalto to explore our metals offerings and other tailored strategies designed to meet your business’s growth strategy.

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