Author: Jinming, research assistant at HashKey Capital; Compiler: Shaw Golden Finance

Overview

In the past year, the scale of tokenized commodities has expanded rapidly, with assets under management (AUM) increasing from US$1.37 billion to US$5.46 billion year-on-year, an annual growth rate of approximately 300%. While growth in the sector continues to accelerate, the expansion is largely driven by rising demand for precious metals, particularly gold. The two leading assets of tokenized gold - XAUT issued by Tether and PAXG issued by Paxos, together account for approximately 95% of the total market share of tokenized commodities. This concentration itself is not an industry shortcoming, but the clearest signal that this type of asset can achieve product and market adaptation on the chain, and it is this that has driven its recent growth. Todaythe core issue in the industry is no longer whether tokenized commodities can continue to develop, but when they can become a mainstream asset recognized by both retail and institutional investors. This article willanalyze the growth trajectory of tokenized commodities, the underlying logic underpinning the long-term continuation of this trend, and the challenges and opportunities that will define the next stage of its development.

Tokenized commodity market size data

Since 2025, the tokenized commodity market has grown from US$1.37 billion to US$5.3 billion in the first quarter of 2026, an increase of more than 530% during the period. From 2025 to the first quarter of 2026, the field achieved continuous monthly net inflows, highlighting the market’s continued demand for tokenized commodities and increasing institutional participation.

Tokenized commodities can be divided into several categories: precious metals, energy, agricultural products, industrial metals and livestock products. The development of each category is uneven. Driven by gold, precious metal tokenized products occupy over 95% of the market share, far exceeding other categories. This phenomenon is not unexpected: the price of gold will rise sharply in 2025, outperforming other assets; coupled with the intensification of global geopolitical tensions, central banks and institutions in various countries have accelerated their accumulation of gold reserves. Nonetheless, this initial market enthusiasm confirms the product-market suitability and distribution potential of tokenized commodities. We believe that this growth trend will continue as more categories of assets gradually come online.

Comparison of the performance of commodities with Bitcoin and Ethereum in 2025

Source: Bloomberg, CoinMarketCap

The growth trajectory of tokenized goods

Source: rwa.xyz, Allium

Are tokenized commodities here to stay?

Yes! Several major structural factors determine that this is a long-term trend rather than a cyclical market:

1. On-chain portfolio diversification

2. Provide new price discovery channels in an environment where traditional financial markets have limitations

3. Open investment channels to the public, allowing directional bets on single assets, which are often more difficult to obtain than indices

4. The increasing adoption rate of institutions will promote scale expansion and channel popularization

5. DeFi composability enables new use cases, such as mortgage lending

On-chain portfolio diversification

From a data point of view, the correlation between commodities and stocks, crypto assets, fixed income products and the US dollar is extremely low. In addition, commodities also have anti-inflation properties.

Although Bitcoin is dubbed a safe-haven asset, its price trends are volatile and its performance is closer to that of a risk asset. Adding tokenized commodities to your portfolio can help diversify your allocation and protect against market volatility.

Source: Yahoo Finance

Price discovery function

Traditional derivatives markets close major exchanges, such as the Chicago Mercantile Exchange (CME), on weekends. For institutions managing global portfolios across Asia, U.S. time zones, or any player who needs to hedge their exposure during weekend macro events, this is a structural shortcoming that will be exposed at critical times.

By tokenizing assets on the chain, it can support 7x24 hours of uninterrupted trading and settlement, and can quickly reprice according to market events during weekends to reflect current market sentiment. This demand has continued to grow in recent months as the share of weekend trading volume has risen from about 7% to 9% month-on-month.

A study by CoinGecko also found that between 2025 and the first quarter of 2026, tokenized gold was two-thirds more accurate in predicting price direction after markets reopened. The increasing accuracy of on-chain signals in guiding off-chain markets also reflects the increasing market depth of such assets - traders are increasingly using on-chain platforms for hedging and arbitrage operations, thereby making the price discovery mechanism more efficient.

A typical example of on-chain price discovery is the HIP-3 market of the DeFi platform Hyperliquid. We highlighted its growing importance in our latest monthly market report: During March, the market share of commodity perpetual contract trading volume in the HIP-3 market soared from 0.57% to 37.75% month-on-month, as the conflict in Iran continued to trigger sharp fluctuations in energy commodity prices. In April, the total value of open contracts for Brent crude oil and West Texas Intermediate crude oil (WTI) exceeded $1 billion.

As market volatility rises sharply, market participants face higher margin requirements, more expensive hedging costs, and stricter risk limits, which makes on-chain trading platforms more attractive for traders to allocate funds.

Source: Allium

Popular investment channels for the masses

For retail traders, especially in emerging markets, participating in commodity trading is an almost unattainable aspiration - such markets have traditionally been open only to institutions. Even in developed markets, the categories available to retail investors are mostly limited to precious metals that are widely traded on exchanges, such as gold and silver. Relatively niche commodity categories such as agricultural products and industrial metals are far less well-known than gold and silver. Even if retail investors are optimistic about their price trends and want to trade on them, it is difficult to participate.

The entry threshold for traditional financial markets is extremely high, while the on-chain market is permissionless and global. Anyone with access to the Internet can easily trade commodity assets and make directional bets. Putting aside the risk of limited liquidity, the on-chain market represented by HIP-3 has built a bridge to connect otherwise inaccessible asset classes with the general public.

Organizational adoption drives scale expansion and channel popularization

In the past few years, many institutions have made significant progress in tokenizing commodities, driven by growing demand. Although the market concentration is extremely high, a number of tokenized commodity products have formed considerable scale on the chain, among which PAXG has performed particularly well. Not only is it huge in size, but its token distribution is also relatively more balanced.

Source: Etherscan

The table below provides a non-exhaustive list of institutional adoptions.

DeFi’s composability spawns innovative use cases on the chain

A development of more structural significance is that such assets are beginning to serve as interest-bearing financial instruments in the decentralized finance (DeFi) system, while this function is still very limited in traditional financial markets.

Tether gold token (XAUT) has been used as collateral in the Aave platform to lend stablecoins and participate in on-chain income strategies; it can also be used as a trading asset on decentralized exchanges such as Uniswap, or as a reserve asset support. As decentralized finance continues to mature, commodity tokens will transform from mere idle value storage tools into productive assets with profitability.

DeFi protocol’s adoption of XAUT

Source: Etherscan

Tokenized commodities on public chains

With its mature decentralized finance (DeFi) and stablecoin ecosystem, Ethereum has become the core issuance and circulation channel for tokenized commodities. Issuers can easily use network effects to expand their business. However, institutions are continuing to promote multi-chain layout, and this strategy may change the structure of each chain in the future.

Arbitrum's growth has been most striking: its underlying assets were almost negligible at the beginning of 2025 and had climbed to $85 million by the end of 2025. In 2026, Arowana, a gold tokenization platform supported by South Korea's Hancom Group, was officially launched. Relying on Hanwha's existing gold exchange and fully compliant infrastructure, it launched tokens that support physical gold mortgages for retail investors.

This move is of great significance: As the third largest gold exchange operator in South Korea, Hanwha Group, with a trading volume of US$600 million, is now advancing its digital commodities strategy through permissionless blockchain, which will effectively boost market liquidity and is a big plus for Arbitrum’s real-world assets (RWA) ecosystem.

Polygon and XRP Ledger have also been selected as issuance vehicles for tokenized commodities, but DeFi-related activities on the chain are still relatively limited.

Source: rwa.xyz

Adoption status of tokenized commodities by region

By region, Singapore and Hong Kong are currently more active in the construction of tokenized infrastructure, compliant issuance, and exchange access to tokenized commodities; Japan and South Korea are more active in the field of on-chain asset issuance led by issuers or initiators. The United States is extremely active in issuance, hosting and channel distribution. The European Union stands out most in the field of tokenized infrastructure and custody solutions.

Challenge

Although the long-term structural growth trend of tokenized commodities remains unchanged, the growth of different categories will still be uneven, mainly restricted by the following multiple factors:

• Difficulty in listing exchanges: Most tokenized commodities have not yet been launched on mainstream centralized exchanges, and channel expansion is limited. However, as regulatory policies gradually become clearer, the introduction of high-demand tokenized commodities will become a natural choice for exchanges. Binance, the world's largest exchange, has recently taken the lead in announcing its support for the gold token XAUT for the first time.

• Low liquidity: XAUT and PAXG rely on institutional trust and channel advantages to obtain good liquidity, while other tokenized assets are in a difficult situation. The liquidity of various protocols is generally insufficient, causing holders to face high slippage costs. This problem is gradually improving as many market makers such as Flow Traders, Wintermute, FalconX, B2C2, GCEX and others have announced access to tokenized commodities for professional and institutional clients.

• Physical Redemption Preference: Retail investors expecting to redeem physical commodities may be disappointed. Putting assets on the chain does not mean that the underlying physical objects can be directly redeemed, because commodities and raw materials are strictly regulated. Redemptions often have minimum thresholds that are too high for retail investors. For example, Tether requires a minimum physical redemption of 340 troy ounces of gold, which is 1 gold bar; on platforms such as metals.io, only compliant institutions can redeem uranium, gold only supports redemption of integer multiples of 1 kilogram, and strategic metals must be redeemed through a compliance account with a value of at least US$10,000.

• Regulatory resistance: Prohibiting retail trading of tokenized commodities will hinder its future popularity. Depending on how tokenized commodities are structured and marketed, they may be classified as commodities or securities in different jurisdictions, and compliance standards need to be carefully followed.

• DeFi integration issues: Some DeFi application scenarios may complicate the anchoring relationship between token prices and commodity spot prices.

• Audit and Transparency: Blockchain can verify the authenticity and circulation of tokens on the chain, but it cannot control the physical management of commodities. Many commodity categories have different grade standards and require a complete legal framework, insurance, regular physical audits and on-chain verification to ensure transparency and credibility.

Future Outlook

Current institutional adoption of tokenized commodities – primarily for autonomous custody and portfolio hedging – is only the beginning of a long-term adoption process. A more decisive change will be the transformation of such assets from passive storage of value to productive assets, supported by the programmable nature of the blockchain.

As DeFi liquidity continues to deepen and more issuers promote similar integrations, the on-chain commodity market will be significantly different from the traditional commodity market. The entry of institutional liquidity will also bring extensive channel effects and credibility, promoting crypto-native retail investors to participate in commodity investments.

Short-term development will remain uneven, with precious metals becoming the biggest beneficiary due to expanding DeFi channels and higher market awareness. Energy and agricultural products have initially achieved on-chain layout. In the future, as supervision becomes clearer, market awareness improves, DeFi integration deepens and applications become more popular, large-scale on-chain circulation will eventually be achieved.