Tokenized Gold — PAXG vs XAUT Institutional Comparison and UAE Market Analysis

Published February 16, 2026 · UAE Tokenized RWA Research

Tokenized Gold Market Overview

The tokenized gold market surpassed $2 billion in total value during 2025, dominated by two institutional-grade products: Paxos Gold (PAXG) and Tether Gold (XAUT). Each token represents one troy ounce of London Good Delivery gold held in professional vault facilities. Tokenized gold rose 227% during key measurement periods in 2025, combining the traditional safe-haven characteristics of physical gold with the operational efficiency of blockchain settlement — 24/7 trading, fractional ownership, and instant cross-border transferability. For UAE institutional investors, tokenized gold offers exposure to the commodity without the operational complexity of physical storage, insurance, and transportation logistics that traditionally characterize Gulf gold markets.

PAXG — Paxos Trust Company

Paxos Gold is issued by Paxos Trust Company, a New York-regulated financial institution supervised by the New York State Department of Financial Services (NYDFS). Each PAXG token is backed 1:1 by one troy ounce of London Good Delivery gold held in Brink's vaults in London. Paxos publishes monthly attestation reports from a third-party auditor verifying that gold reserves equal or exceed tokens in circulation. The regulatory framework provides institutional comfort — Paxos operates under the same supervisory regime as traditional financial institutions, with capital requirements, consumer protection obligations, and regular examinations by NYDFS. PAXG holders can redeem tokens for physical gold delivery or USD equivalent, providing exit optionality that institutional investors require.

XAUT — Tether Gold

Tether Gold is issued by TG Commodities Limited, associated with the Tether ecosystem. Each XAUT token represents ownership of one troy ounce of London Good Delivery gold held in a Swiss vault. Tether publishes quarterly attestation reports for gold reserves. XAUT's institutional consideration differs from PAXG primarily on the regulatory dimension — Tether operates under a different regulatory framework than Paxos's NYDFS supervision, which some institutional compliance teams evaluate as a higher counterparty risk factor. However, XAUT benefits from Tether's extensive exchange integration and trading pair availability, potentially offering superior liquidity in certain market conditions. The Swiss custody location may appeal to Gulf investors with existing Swiss private banking relationships and comfort with Swiss financial infrastructure.

UAE Allocation Strategy

For UAE institutional portfolios, tokenized gold serves as a hedge against USD depreciation risk (relevant given the AED peg), geopolitical risk exposure in the Gulf region, and inflation protection during periods of monetary policy uncertainty. Allocation between PAXG and XAUT should consider: regulatory compliance requirements of the allocating institution (PAXG's NYDFS supervision may satisfy stricter compliance frameworks), custody preference (London vs Swiss vaulting), liquidity requirements (exchange availability and trading pair depth), and counterparty risk tolerance. A balanced approach may hold both products across different custody jurisdictions, providing diversification of custodian and issuer risk while maintaining full gold price exposure through tokenized instruments accessible via institutional platforms.

2026-2027 Outlook and Market Projections

The trajectory for tokenized gold points toward significant institutional expansion through 2026-2027 as regulatory frameworks consolidate and infrastructure matures. The global RWA tokenization market is projected to reach $100 billion by end of 2026 according to Bitfinex research, with longer-term forecasts from McKinsey estimating $2 trillion by 2030 and Ripple-BCG projecting $18.9 trillion by 2033. Within this growth, the UAE is positioned to capture outsized institutional market share given its five-year regulatory head start, government-backed tokenization initiatives, and concentration of sovereign wealth and institutional capital across the Gulf region. The convergence of MiCA implementation in Europe, evolving SEC frameworks in the United States, and the UAE's established multi-regulator architecture creates conditions for cross-border institutional flows that benefit UAE-domiciled tokenized asset platforms.

Institutional Due Diligence Checklist

Before allocating to tokenized instruments in this category, institutional investors should verify: the platform's regulatory licensing status across applicable UAE authorities (VARA, ADGM FSRA, DIFC DFSA), smart contract audit history from recognized security firms, custody architecture including key management procedures and insurance coverage, secondary market liquidity metrics including average daily volume and bid-ask spreads, the legal enforceability of token-based rights under applicable UAE or free zone law, compliance with the allocator's own investment policy constraints on digital asset exposure, tax treatment of tokenized asset income under the UAE's 9% corporate tax framework and applicable withholding arrangements, and the operational resilience of the platform including business continuity testing results and incident response history. This due diligence framework ensures that tokenized asset allocation decisions meet the same institutional standards applied to traditional alternative investments.

Comparative Data Points

For Gulf-based institutional portfolios with existing physical gold allocations, tokenized gold provides a complementary position offering immediate liquidity, cross-border transferability, and programmable integration with broader digital asset treasury management strategies — capabilities that physical gold storage cannot provide regardless of vault location or insurance coverage.

Key metrics for institutional evaluation: the total tokenized RWA market reached $24 billion in early 2026 representing a 308% increase over three years, tokenized US Treasuries alone account for $8.7 billion with BlackRock BUIDL leading at $1.87 billion AUM, tokenized gold products PAXG and XAUT collectively exceed $2 billion, Dubai real estate transactions totaled AED 761 billion in 2024 with DLD targeting 7% tokenization by 2033, over 40 major financial institutions globally are now involved in RWA tokenization, and 86% of surveyed institutional investors reported digital asset exposure or allocation intent. These data points establish the institutional credibility of tokenized RWAs as an emerging asset class within established portfolio construction frameworks. For UAE-focused allocators, the combination of regulatory maturity, market depth, and tax efficiency creates structural advantages that compound as institutional infrastructure scales.