How to Tokenize a Metal: The Process Roadmap
Who does what, when and why — across six phases and six roles. Pick an asset class, a jurisdiction and a chain to see a realistic path from physical metal to on-chain instrument. Scope is intentionally narrow: only metals with established or emerging real-world tokenization products are listed. All references link to primary regulators and infrastructure providers.
01Phases of the tokenization journey
02Who does what — RACI matrix
| Role | P1 Structure | P2 Custody | P3 Contract | P4 Audit | P5 Launch | P6 Secondary |
|---|---|---|---|---|---|---|
| Issuer | R+A | A | A | C | R+A | A |
| Custodian (LBMA-approved) | C | R | I | R | C | R |
| Oracle (Chainlink PoR) | I | C | R | R | C | R |
| Regulator | C | I | I | C | A | I |
| Auditor (Big 4 / smart contract) | I | C | C | R | I | C |
| Investor | I | I | I | I | I | R |
R Responsible — does the work · A Accountable — signs off · C Consulted · I Informed
03Regulatory route — Hong Kong SFC
SFO Type 1 + Type 7 licence
For dealing in or advising on tokenized securities. Application ~6–9 months. Capital adequacy: HK$5M paid-up + HK$3M liquid.
VATP regime (Jun 2023 update)
If the tokenized metal is structured as a virtual asset, VATP licensing applies. Indicative setup HK$140k–$300k; annual HK$70k–$180k.
HK Tokenisation of Investment Products policy
SFC circular 02 Nov 2023: tokenization of SFC-authorised investment products is permitted under existing regime. Path B if structured as collective investment scheme.
Capital adequacy + ongoing reporting
Quarterly returns, annual audit, fit-and-proper review of substantial shareholders, AML monitoring under SFC AML/CFT guideline.
Payment Services Act — DPT licence
Digital Payment Token services need a Major Payment Institution licence from MAS. Stablecoin-related activities require single-currency stablecoin (SCS) framework as of Aug 2023.
Project Guardian — institutional pilots
MAS-led industry initiative for tokenized assets and DeFi institutional adoption. Sandbox-style framework for issuance and secondary trading of tokenized RWA.
Securities & Futures Act for security tokens
If the token meets the definition of a capital markets product (security or unit in a collective investment scheme), full Capital Markets Services licence under SFA applies.
Stablecoin Regulatory Framework (MAS, Aug 2023)
For metal-backed tokens used as a means of payment: SCS-pegged single-currency stablecoin framework imposes reserve, audit and redemption requirements.
VARA Virtual Asset Activities Licence
Required for issuance, exchange or custody of virtual assets in the Emirate of Dubai. Categories include Issuance Services and Custody Services.
VARA Issuance Rulebook
Specifies requirements for issuing virtual assets including asset-referenced tokens and fiat-referenced tokens. Whitepaper approval pre-issuance.
ADGM FSRA — alternative path
Abu Dhabi Global Market financial centre offers separate framework via FSRA for digital security and digital asset activities.
VARA Custody Services Rulebook
Defines segregation, audit and Proof-of-Reserve obligations for custodians of virtual assets backing tokenized products.
FINMA token categories
Three categories: payment, utility, asset (security). Metal-backed tokens typically classify as asset tokens, subject to securities law.
DLT Act (in force 2021)
Swiss federal act on adaptation to DLT. Created DLT trading facility licence and ledger-based securities (Bucheffekten) regime for on-chain issuance.
FinIA / FinSA — securities issuance
Financial Institutions Act (FinIA) and Financial Services Act (FinSA) govern licensing and prospectus duties for asset-token issuance.
Anti-money laundering (AMLA)
Token issuers and custodians subject to Swiss AMLA — affiliation with SRO or direct FINMA supervision depending on volume and activity.
Asset-Referenced Token (ART)
MiCA category for tokens referencing multiple assets including commodities. Authorisation required from competent authority of home Member State; passportable EU-wide.
Crypto-Asset Service Provider (CASP)
Issuance, exchange, custody, advisory require CASP authorisation. ESMA-coordinated supervisory regime with capital and operational requirements.
White paper notification
Mandatory white paper with structure prescribed by MiCA Annex I. Notify competent authority 20 working days before publication. EU-wide passport once notified.
Reserve and redemption rules
ART issuers must maintain a fully-segregated reserve of high-quality liquid assets matching outstanding tokens. Daily redemption right at market value.
Securities Act registration or exemption
If the metal token is a security (Howey test), registration under Securities Act 1933 or exemption (Reg D, Reg A+, Reg S) is required.
State money transmitter licences
Custody, transfer and conversion of tokenized assets typically trigger state-level money transmitter licensing (50-state mosaic). New York BitLicence is the strictest.
FinCEN registration
Money Services Business registration with FinCEN, BSA/AML programme, SAR/CTR filing for token transfers above threshold.
CFTC commodities oversight
If structured as a swap or derivative on the metal, CFTC jurisdiction. Spot tokenized commodity is generally outside CFTC scope but fraud authority applies.
Payment Services Act — Crypto-Asset Exchange
Tokens classified as crypto-assets require registration as a Crypto-Asset Exchange Service Provider under PSA Article 63-2.
Financial Instruments & Exchange Act (FIEA)
If the token is an Electronically Recorded Transferable Right (security-like), FIEA applies — Type I or Type II Financial Instruments Business licence.
JVCEA self-regulation
Japan Virtual and Crypto Assets Exchange Association — self-regulatory body, mandatory membership for crypto-asset exchanges. Token listing screening rules.
Stablecoin amendment (Jun 2023)
Revised Payment Services Act creates Electronic Payment Instrument category — applicable to fiat-referenced stablecoins; relevant for metal-pegged tokens used as means of payment.
04Detailed phases
Phase 1Structuring (4–8 weeks)
Legal product design: choose token wrapper (security token, asset-referenced token, virtual asset, or e-money). Define rights of token holders (redemption, voting, dividends). Engage law firm in target jurisdiction for opinion letter.
- Decide custody model: physical-backed allocated vs synthetic warrant
- Draft term sheet including denomination, redemption window, fees
- Pre-application meeting with regulator (most jurisdictions encourage)
- Tax structuring (entity domicile, treaty network, VAT treatment of metal trades)
Phase 2Custody setup (2–6 weeks)
Appoint qualified custodian. For precious metals, LBMA Good Delivery vault is the de-facto standard. For base and battery metals, LME-approved warehouse or independent custody. Sign segregated allocated storage agreement and obtain bar / warrant list with serial numbers.
- LBMA-approved vaults: Brink's, Loomis, Malca-Amit, JP Morgan, HSBC
- LME-approved warehouses: Henry Bath, Steinweg, Access World, ISTIM
- Allocated vs unallocated storage — allocated is the standard for tokenized backing
- Insurance: all-risk policy with named beneficiary equal to issuer
Phase 3Smart contract deployment (3–5 weeks)
Token standard choice depends on jurisdiction and use case. Most metal tokens use ERC-20 for fungibility, ERC-1400 for permissioned security tokens, or chain-native standards (Stellar SEP-8 / -24, Solana SPL).
- Integrate Chainlink Proof-of-Reserve oracle for on-chain reserve attestation
- Implement KYC gating via on-chain whitelist if security-token wrapper
- Test on testnet (Sepolia, Base Sepolia, etc.) before mainnet deployment
- Deploy via multisig (Gnosis Safe) with timelock for upgrades
Phase 4Audit and Proof-of-Reserve (4–6 weeks)
Two parallel tracks: smart contract security audit (code review) and physical reserve audit (Big 4 or independent). Set up automated monthly reconciliation between vault inventory and on-chain token supply.
- Smart contract auditors: OpenZeppelin, Trail of Bits, ConsenSys Diligence, CertiK
- Physical reserve attestation: PwC, Deloitte, EY, KPMG, BDO, Armanino
- On-chain PoR refresh frequency: minimum monthly, ideally weekly or daily
- Publish PoR feed address publicly on issuer website
Phase 5Launch (2–3 weeks)
Submit final regulatory application package, publish white paper or prospectus, open subscription window. Coordinate marketing within compliance constraints (most jurisdictions restrict retail solicitation of tokens to local residents).
- White paper review by regulator (timing varies 20 working days to 9 months)
- KYC onboarding system live before any token transfer
- First minting event with public PoR attestation
- Initial liquidity provision on at least one licensed venue
Phase 6Secondary market (ongoing)
Onboard licensed virtual asset trading platforms (VATPs) or regulated DEX. Maintain monthly PoR audit, regulatory reporting, ongoing legal review of jurisdictional updates.
- Licensed VATPs in target jurisdictions (e.g. HK: HashKey, OSL)
- Market making contracts with token-aware market makers
- Bridge to other chains via audited bridges only (or canonical bridges)
- Annual independent attestation refresh
05Reference tokens and providers
PAX Gold (PAXG)
Paxos-issued ERC-20 token; 1 token = 1 troy ounce of LBMA Good Delivery gold held at Brink's London vaults. NYDFS-regulated. Reserve attested by WithumSmith+Brown monthly.
Tether Gold (XAUT)
Tether Holdings token; 1 token = 1 troy ounce of LBMA gold in Swiss vaults. ERC-20 on Ethereum and TRC-20 on Tron. Reserve attestation published quarterly.
Kinesis Gold & Silver (KAU / KAG)
Allocated gold (KAU = 1g) and silver (KAG = 10g) tokens. Stored in Brink's Singapore, Switzerland, UK. Audited by BDO, refresh monthly.
HashKey Exchange (HK VATP)
SFC-licensed virtual asset trading platform in Hong Kong. Operates under Type 1 + Type 7 + VATP regime. Listed tokenized assets including PAXG.
Your plan Gold → Hong Kong SFC → Base chain
- Phase 1 — Engage SFC-licensed Type 1 corporation for product structuring (4–8 weeks)
- Phase 1 — Decide token wrapper: security token (SFO Type 1) vs virtual asset (VATP regime)
- Phase 2 — Appoint LBMA Good Delivery vault (e.g. Brink's HK, Malca-Amit HK, Loomis)
- Phase 2 — Sign segregated allocated storage agreement; obtain bar list with serials
- Phase 3 — Deploy ERC-20 or ERC-1400 contract on Base; integrate Chainlink Proof-of-Reserve feed
- Phase 4 — Engage Big 4 or accredited blockchain auditor for smart contract code review
- Phase 4 — Set up monthly LBMA-verified bar count vs on-chain supply reconciliation
- Phase 5 — Submit SFC application package; expect 6–9 month review
- Phase 5 — Publish whitepaper, terms of issuance, audit reports (SFC-authorised)
- Phase 6 — Onboard licensed VATP for secondary trading (HashKey, OSL — currently licensed in HK)
Estimated total time: 15–28 weeks · Estimated setup cost: $400k–$1.2M (legal + licensing + tech + audit) · Numbers based on public SFC fee schedules, LBMA custody indicative rates and smart contract audit market rates.
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