Dubai Is Going All In on Tokenized Gold

While central banks are stockpiling bullion, Dubai’s Multi Commodities Centre (DMCC) is partnering up with Comtech Gold to introduce digital tokens backed by physical gold bars.

Why it matters: The United Arab Emirates (UAE) is launching digital assets on blockchain that represent fractions of gold bars. A legally backed tokenization of precious metals might unleash further digitization of real world assets.

Driving the news: Dubai state media announced the creation of Comtech Gold Tokens (CGO) backed by physical gold bars in DMCC vaults on the 21st of November. The tokens will be registered on the XinFin Protocol blockchain.

• Each CGO token represents 1 gram of gold, with the involved bullion weighing about one kilogram per bar. About 122 kilograms of gold have already been tokenized.
• These tokens are Shariah compliant and come with DMCC Tradeflow warrants, making the gold trade more accessible for retail traders.
• “The tokenization of real world assets is nothing new, but the significance of this case lies within the high degree of government adoption,” says Kaia Wang, CMO of global crypto exchange LBank. “Stable commodities, like gold, but also other resources like nickel and copper, could be adapted to a similar process.”

Between the lines: The move to tokenize gold further solidifies Dubai’s ambitions of becoming a blockchain and Web3 hub.

• The Dubai government has been busy attracting thousands of blockchain companies to settle in the region, estimating the budding industry could add 4 billion dollars to its GDP and create around 40,000 jobs by 2030.
• “Late adopters, like traditional financial institutions and governments, started realizing the value of blockchain technology and are catching up,” according to Wang.
• LBank is currently in the process of acquiring a Virtual Assets Regulatory Authority (VARA) license in Dubai. The firm regards tokenized gold as an interesting asset, but doubts private exchanges could offer the brand-new equity to customers. “I suspect authorities won’t share this service. Perhaps one day with a few carefully selected exchanges through a novel license,” Wang says.

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