In a recent press release, UAE based Fuze, digital assets infrastructure provider, has partnered with UK based Minted Connect; an FCA licensed and regulated API services platform to tokenize precious metals such as gold. Both entities will explore the tokenization of Real World Assets (RWA).

Minted Connect offers a cutting-edge API service that empowers businesses to seamlessly offer their customers access to buying, selling, transferring, and tokenizing 100% asset-backed precious metals.

Fuze is a VC-backed startup specializing in digital asset infrastructure, providing businesses in the MENA region with embedded experiences for their customers, facilitating access to innovative crypto and digital asset products through a regulatory-compliant infrastructure.

Fuze has already established partnerships with leading global and regional banks, fintech firms, financial institutions, and super apps.

The Middle East currently holds a substantial portion of the world’s above-ground gold reserves, with a staggering 1,174 tonnes securely held within the region. This represents not just wealth, but also a historical testament to the region’s deep-rooted affinity for precious metals.

Minted Connect and Fuze want to digitize of 1% of this gold, opening up unprecedented opportunities for individuals to easily save and invest in precious metals, making it accessible to all in a fractionized and digitized form.

Together, Minted Connect and Fuze are poised to transform the tokenization of Real World Assets, leveraging Minted Connect’s expertise in asset-backed precious metals and Fuze’s robust digital asset infrastructure.

This strategic partnership represents a pivotal moment for enabling businesses to tap into the value of real world assets through tokenization, providing new avenues for investment and financial inclusion.

“We’re thrilled to partner with Fuze,” said Shahid Munir, Co-Founder of Minted Connect. “This collaboration truly showcases our commitment to providing innovative and secure solutions for businesses seeking to offer asset-backed precious metals transactions to their customers. The path forward in this collaboration will be exciting for both entities, and will deliver a tangible impact on the industry.”

Commenting on the partnership, Mohammed Ali Yusuf (Mo Ali Yusuf), Co-Founder and CEO of Fuze said; “We are excited to sign this agreement with Minted Connect, who have already made significant innovations in the way people can trade precious metals. Integration with digital assets infrastructure is a game changer for businesses who want to roll out asset-backed, tokenized products to their customers in a secure and compliant manner.”

Others including Aurus believe that Precious metal owners can generate earnings on their gold and make it work for them just by holding it in tokenized form. UAE based Aurus Technologies, offered family offices the opportunity to tokenize real world assets through its sustainable tokenization as a service solution (TAAS) platform.

In 2022 UAE became the home for gold-backed token providers.

Recently HSBC announced that it would be tokenizing physical gold using Blockchain technology. The tokenized gold stored in HSBC London Bank vaults, will offer tokens that represent 0.001 troy ounce traded on HSBC Evolve platform to institutional investors, with UAE Gold tokenization pioneers applauding this effort and believe this will grow the precious metal tokenization sector further.

Mark Williamson, global head of FX and commodities partnerships and propositions, confirmed the launch of the platform in a Bloomberg interview.

Gold has become a safe haven for many investors and this has also been pushed by the demand for real world tokenization solutions.

The advanced platform creates a ‘digital twin’ representing loco London gold, which facilitates trade through the HSBC Evolve platform or an API. This innovation generates a permissioned digital representation of clients’ physical gold holdings, which is integrated into HSBC’s operational infrastructure. The system enables efficient tracking of allocated and unallocated gold positions corresponding with physical holdings.

Richard Bibbey, HSBC’s Global Head of FX, EM rates and Commodities, said: “As one of the earliest adopters of DLT, we are pleased to reinforce our leadership position in the gold market by tokenizing physical gold. We continue to pave the way for improving the post-trade market infrastructure of capital markets.”

Apart from facilitating potential fractionalization of loco London gold bars and direct retail investor participation, the platform also allows clients to view their tokenized gold trades.

John O’Neill, Global Head of Digital Assets Strategy, Markets and Securities Services, HSBC, said: “Tokenising physical gold represents a further advance in HSBC’s overall digital assets strategy. In addition to demand for native digital assets, we are seeing appetite for tokenisation solutions that can maintain a link to specific real-world use cases, such as gold. Our approach to gold tokenisation complements HSBC Orion, and is part of our commitment to creating a world-leading set of digital asset capabilities to best serve the needs of our clients.”

While the tokenized gold market is primarily dominated by Tether Gold (AUT) and PAX Gold (PAXG), both having market capitalizations around $490 million and $480 million, respectively, there are several companies based out of UAE who are also offering gold tokenization solutions.

LaraontheBlock spoke with tokenized gold experts in UAE to view how this will help tokenization of precious metals and their thoughts on this.

Navin Dsouza Co-Founder & CEO at UAE based Comtech Gold told LaraontheBlock, “This is really good news for the Gold Tokenization industry. With Global Banks like HSBC offering Tokenized Gold it reemphasizes the importance of blockchain and digitalization in Gold along with the need for De-Dollarization in the current era of high inflation.”

He adds,” Comtech has the complete infrastructure along with the Governance framework with DMCC (Dubai Multi Commodities Center) to offer Gold Tokenization product to any financial institutions who want to offer Tokenized Gold to its customers in a form of Comtech white labeled solution. We will see many players and banks joining the Tokenization race because of the strong use case benefit to the Industry.”

Ahmed Bin Sulayem Executive Chairman and Chief Executive Officer of DMCC explained, “As a long-standing advocate for gold tokenization, HSBC’s entry to blockchain will not only support much-needed transparency, but provide greater accessibility and security for investors. Having launched our own tokenization mechanism in November 2022 in partnership with Comtech Gold Bullion, backed by our internal DMCC Tradeflow platform, we’ve already tokenized 144kgs of gold for investors, while providing a value-added service that has the capacity to expand into other precious metals in the near term.”

Mark Gesterkamp, Business Development Director at Aurus Gold headquartered in UAE commented, “We applaud the step HSBC is taking by joining gold tokenization as gold has an important role in the transition to on-chain finance. It is no surprise they have done so, as it will surely open up the market through smaller traded denominations and improve liquidity and tradability.

He explained how already Aurus’ Tokenization-as-a-Service allows for any financial institution to use its technology by minting a digital representation of its bullion from gold, silver to platinum. This entails banks and family offices looking to join the digital space and finding new distribution channels.  He adds, “The decentralized nature of gold tokenization is key here, whilst being a supplying partner of the Aurus ecosystem it allows clients to benefit from trading transactions.”

UAE was one of the first countries globally to begin tokenization of gold and other precious metals. Startups from the region and globally are setting up in the country as gold-backed tokens witness a growth surpassing that of cryptocurrencies. The market cap of gold-backed tokens has exceeded $1 billion — a far cry from $100 million in 2020.

Most of the entities developing gold tokens have chosen the UAE because of its positive crypto stance, its regulations, its gold hub, and the region’s affinity to Shariah compliant commodities. With this new announcement by HSBC, the UAE is poised to become a more formidable hub for tokenization of precious metals.

In March 12022, the market capitalization of gold-backed tokens exceeded $1 billion for the first time.

As gold-backed tokens continue to increase in popularity, the UAE appears to be becoming a hotbed for the physical gold investment alternative.

Startups from the region and globally are setting up in the country as gold-backed tokens witness a growth surpassing that of cryptocurrencies. The market cap of gold-backed tokens has exceeded $1 billion — a far cry from $100 million in 2020.

A gold-backed cryptocurrency is a digital currency that is backed by physical gold. The currency’s value is based on the current market value of gold and can be used for transactions like any other cryptocurrency.

Bullion gold experts estimate that 20 to 40 percent of the $11 trillion global gold market passes through Dubai every year. These findings can be attributed to entities embracing gold tokenization and commodity token exchanges.

Ahmed Bin Sulayem, Chairman and CEO of Dubai’s Dubai Multi Commodities Centre (DMCC) asserts the pivotal role that Dubai plays in the global trade market due to its location and its refineries and sees

He states, “Gold plays a critical role in boosting the economies of producing countries and nations with large jewelry manufacturing sectors. Arguably the most important industrial use of gold is in the manufacture of electronics, so as technology improves, demand for gold from the tech sector is also rising rapidly. DMCC is at the center of precious metals and Blockchain technology.”

Gold token growth in UAE

Most of the entities developing gold tokens have chosen the UAE because of its positive crypto stance, its regulations, its gold hub, and the region’s affinity to Shariah compliant commodities.

Ben Sharon, the CEO of Illumishare SRG, says the UAE is the biggest blockchain hub in the world, with many top blockchain companies moving their headquarters to the country.

“We found partners that share the same beliefs as we do,” said Sharon, “We know that together we will make the world a better place where money will provide both stability and opportunities.”

The Abu Dhabi-based blockchain startup developed the SRG token based on a digital gold standard to open the crypto market to the masses. The gold that will be utilized for SRG will be held in the UAE in a bank in Abu Dhabi.

The project is supported by the Private Office of His Highness Sheikh Mohamed Bin Ahmed Bin Hamdan Al Nahyan from the Royal Family of Abu Dhabi.

While others such as Comtech, view the UAE and Dubai in particular as the center of gold trade and  blockchain technology. Comtech, is digitizing gold on XDC blockchain network.

ComTech’s Global Marketing Director, Zulfiqar Naqvi, opines, “Our vision is to turn it from the City of Gold to the City of E-Gold.” There reserves are now 122 KG of gold bars in just five months. The 122 Gold bars, 1 kg each with purity of 999.9, are securely stored with Emirates Transguard.

Blockchain tokenization entity Aurus also set up in Dubai’s DMCC because Dubai is a city at the forefront of innovation, blockchain technology, adding to the scalability of their ecosystem. Aurus seeks to democratize the precious metals market using tokenization.

Mark Gesterkamp explains, “We want gold, silver and platinum to be traded by more people earning them passive rewards. At the moment we are onboarding local and region partners including crypto exchanges, bullion refineries and brokers, as well as expanding Aurus precious metal backed tokens to the global retail market.

The attraction of UAE also stems from it being at the center of a strong Islamic investment front. Australian based Marhaba DeFi Islamic compliant platform, better known as MRBH with an operational license in UAE recently launched its TijariX token commodity exchange. TijariX has already commenced with the listing of gold tokens.

Mohammed Naquib, Founder and CEO MRHB Network, explains, “The Islamic community has been using gold as a means of currency and store of value from the earliest days of Islam. Yet it was always difficult to ensure secure storage of physical gold, and liquidate it when needed. Tokenized gold solves these problems while Islamic compliant platform assures adherence to Islamic practice.”

Even entities operating gold refineries in Dubai have incorporated gold tokenization into their business model. UAE REIT Development which is currently building a gold refinery to be launched in 2023 will offer tokenized gold and a tokenized gold exchange. 

Karen Kriska, Vice President of Customer Relations at REIT Development says, “We will digitally mint 85 percent of the value of the gold into tokens. So if someone wants to stake their gold in the form of GoldCoin, they would stake it in our “We will never allow our liquidity to increase to a point were those staking cannot make 0.5 percent in transaction fees per month or 6 percent a year      unless, of course, we increase the gold reserves.”

Why tokenize Gold

Every entity that has chosen to tokenize gold has attributed their interest to different factors. Some believe that it is easier to convince people to buy tokenized gold rather than crypto, while others see gold as an already well accepted investment commodity in need of a more open and accessible marketplace.

Ben Sharon, CEO of IllumiShare explains that only 4.2 percent of the world population has adopted crypto because they are unable to identify the real value behind crypto.  Yet when it comes to gold is has always been seen as a reliable asset in terms of store of value

By combining gold with technology and cash, IllumiShare is creating an additional hedge, defining a new crypto category and redefining money in the process. Sharon explains, “This is the reason we call SRG a Trust token.”

Comteq’s Naqvi sees gold as an investment product that is easier to understand and standardize. He says, “Gold has been used as an investment product for centuries as well as being a product close to people.”  Comteq built their gold token with two aspects in mind speed, and security which is attractive to investors.

Gesterkamp, from Aurus believes that tokenization of gold makes a more inclusive and efficient precious metals market attracting younger demographics while offering easy accumulation, wider payments and ability to be utilized in DeFi and GameFi applications. Gesterkamp adds, “The increased transaction from tokenized gold implies more fees collected and as such more yield generated to ecosystem partners.”

He adds, “We also believe there is a chance that precious metals will be used to back up CBDCs (Central Bank Digital Currencies) besides a basket of currencies.”

Islamic compliant tokenized precious metal exchange TejariX believes tokenized gold will attract low risk crypto investors as well as long standing investors in traditional gold. Naquib also believes it will make gold trading accessible to the masses and is a better alternative to dollar backed stablecoins. He states, “Using TejariX platform we plan to offer Gold & Silver Standard (GSS) bullion tokens to investors around the world at 0.03% transaction fee. Each token is worth 1 gram of precious metal, and investors can buy in increments of 1/18.”

Bin Sulayam emphasizes that the tokenization of gold may increase given that gold has always been a favorite of investors and has better performed during periods of higher inflation and economic crisis. He asserts, “Tokenized gold combines the benefits of cryptocurrencies with the underlying value of the precious metal. Tokenizing precious metals allows greater democratization of the asset class through easier access, increased liquidity, faster settlement, lower cost, and in some cases, enhanced risk management.”

The Future of Gold tokens

The Future of gold backed tokens looks bright globally opens up an opportunity for the UAE to play a pivotal role. With the World Gold council plan to make gold more liquid, starting with $500 billion in gold bars in UK utilizing blockchain technology for tracking and developing gold tokens, the tokenization of precious metals is just starting.

You can also read this on Cointelgraph MENA in arabic