Kurt Hemecker, CEO of Gold Token SA, said digital gold can transform bullion into a more liquid financial instrument. Gold has surpassed U.S. Treasuries to become the world's top central bank reserve asset, and the recent global energy crisis provoked by the war in Iran has proven the precious metal's worth as an important source of liquidity, according to Hemecker in an interview with Kitco News. Tokenization could help solve one of the gold market's longstanding limitations by enabling 24/7 trading, collateral use, and integration into the broader financial system. The transformation faces major obstacles, with trust remaining the biggest challenge according to Hemecker. Unlike government bonds or bank deposits, tokenized gold depends on confidence in the underlying physical metal, the custodian, the legal ownership structure, and the jurisdiction where the bullion is stored.
Tokenized Gold Enables 24/7 Trading Unlike Traditional Bullion Markets
Unlike traditional bullion markets, which largely operate during business hours, tokenized gold can trade 24 hours a day, seven days a week, providing investors with continuous liquidity and accessibility, Hemecker said. Gold Token SA is the tokenization arm of MKS PAMP. Hemecker told Kitco News that the real opportunity extends well beyond retail trading, as digital representations of physical bullion could eventually help solve one of the gold market's longstanding limitations: liquidity.
Basel III Recognizes Physical Gold But Not as High-Quality Liquid Asset
Physical gold already receives favorable regulatory treatment under Basel III banking rules, but it is not recognized as a High-Quality Liquid Asset (HQLA), limiting its broader use within the banking system. "I think tokenization gives the argument that it could be considered a high-quality liquid asset," Hemecker said. "In that case, why not use it in repo transactions or for settling interbank obligations?" Hemecker said tokenization strengthens the case for that status to eventually change.
Central Banks Monetized Gold Reserves Through Swaps During Market Disruptions
During this year's financial market disruptions, several central banks actively monetized portions of their gold reserves through swaps and other liquidity operations, reinforcing bullion's role as a monetary asset rather than simply a reserve sitting idle on a balance sheet. Tokenization could make those transactions significantly more efficient by allowing ownership of vaulted bullion to change hands digitally, Hemecker said. Many official institutions insist on maintaining custody of their own gold, meaning any future tokenization framework would require standardized custody agreements, robust legal protections, and industry-wide operational standards.
Trust Remains Biggest Challenge for Tokenized Gold Adoption
"The biggest question mark is trust," Hemecker said. Unlike government bonds or bank deposits, tokenized gold depends on confidence in the underlying physical metal, the custodian, the legal ownership structure, and the jurisdiction where the bullion is stored. "Not all gold tokens are created equal," he said. "People will increasingly look at what is backing the token, the property rights, the jurisdiction, the quality of the gold, the sourcing and the provenance." Those issues become even more important if central banks or large financial institutions ever participate in the market.
Lack of Standardization Presents Major Obstacle for Digital Gold Market
"There would probably have to be some pretty strict service-level agreements and standardization across the industry," Hemecker said. That lack of standardization remains one of the biggest challenges facing digital gold today. Hemecker said the market eventually needs interoperable standards that allow trusted tokenized gold to move freely between platforms, jurisdictions, and financial institutions. "For such an old industry, tokenization is still very nascent," he said. "It's getting that standardization across the physical layer that allows you to get liquidity on the digital layer."
Hemecker said that the recent correction in gold prices is an opportunity rather than a setback. "I love building during a down market because you can get all the rails in place before things take off again," he said. "The thesis for gold hasn't changed. This is a great accumulation opportunity, and we're seeing people starting to come back into the market." Hemecker told Kitco News that the macro drivers---currency debasement, geopolitical uncertainty, and diversification---are all still there.
FAQ
What did Kurt Hemecker say about tokenized gold's trading capabilities?
Kurt Hemecker, CEO of Gold Token SA, said in an interview with Kitco News that tokenized gold can trade 24 hours a day, seven days a week, unlike traditional bullion markets which largely operate during business hours. This provides investors with continuous liquidity and accessibility.
Why is trust the biggest challenge for tokenized gold according to Hemecker?
Hemecker said trust is the biggest question mark because tokenized gold depends on confidence in the underlying physical metal, the custodian, the legal ownership structure, and the jurisdiction where the bullion is stored. He noted that not all gold tokens are created equal and people will increasingly examine what backs the token, property rights, jurisdiction, gold quality, sourcing, and provenance.
What regulatory status does physical gold currently have under Basel III?
Physical gold already receives favorable regulatory treatment under Basel III banking rules, but it is not recognized as a High-Quality Liquid Asset (HQLA), which limits its broader use within the banking system. Hemecker said tokenization strengthens the argument that gold could be considered a high-quality liquid asset.
