Gold-backed ecosystem aims to bridge blockchain to TradFi

The digital asset space has never been closer to everyday use thanks to two major drivers: the tokenization of real-world assets (RWAs) and the constant innovation in crypto payment systems. These trends signify a shift toward merging tangible assets with digital finance, connecting traditional and decentralized systems. However, they come with challenges that must be addressed to unlock their full potential.

RWA tokenization, which turns physical assets into digital tokens on a blockchain, is seen as the future of asset ownership and trading, with consulting firm McKinsey predicting a market size of $2 trillion by 2030 .

Among RWAs, gold has become a popular choice due to its status as a stable store of value and hedge against uncertainty. The fusion of gold’s stability with blockchain’s transparency and accessibility presents a strong proposition for investors. However, ensuring the legitimacy and storage of tokenized assets is crucial. Without transparency, trust in these digital assets can quickly erode.

Traditional Gold vs. Bitcoin

Another key issue is balancing the growth potential of digital assets like Bitcoin ( BTC ) with the stability of traditional assets like gold. Its volatility often offsets Bitcoin’s rapid growth, making it less reliable during market downturns. In contrast, gold’s stable pricing makes it a safe haven in turbulent times.

Gold’s value has risen by 12% in the first half of 2024, outpacing most major asset classes. This strong performance underscores gold’s role as a stable asset, making it an ideal complement to crypto portfolios, which are often subject to significant volatility. By adding gold, investors can balance the unpredictable swings in digital assets with a historically reliable store of value, helping to provide both stability and long-term growth potential in a diversified portfolio.

This dichotomy allows gold-backed digital assets to act as a stable exit strategy from volatile investments. The challenge lies in creating a token that combines stability and growth potential without the pitfalls of fiat-backed stablecoins, which lose real value over time due to inflation.

Innovating crypto payments amid market volatility

The demand for practical crypto payment solutions is rising, but volatility poses a significant challenge for daily use. While stablecoins provide an alternative, they can lose purchasing power due to inflation. A gold-backed cryptocurrency could serve as a middle ground — offering stability without the risks associated with fiat devaluation. Such a token would provide a reliable store of value and a viable means for transactions, bridging the gap between volatile cryptocurrencies and inflation-prone stablecoins.

Merging gold with blockchain

International Precious Metals Bullion (IPMB) , a gold-backed digital asset provider, seeks to combine the security of gold with blockchain technology’s innovative potential. With over 250 years of collective experience in precious metals, traditional finance and the blockchain industry, IPMB brings a new approach to boost the accessibility and utilization of investment-grade gold through its two-token model.

The IPMB Token, a utility and payment token, is at the heart of this innovation. Each IPMB Token is backed by one gram of gold and functions as a digital gold-backed currency, offering users a stable and reliable means of transaction. This is particularly significant in a market where volatility is the norm, as IPMB Tokens can potentially serve as a medium for payments and portfolio diversification without the risk of sudden depreciation.

Instead of simply mirroring the price of gold like a stablecoin, the IPMB Token provides the market with a digital currency on the gold standard. Each IPMB Token holder owns a gram of redeemable physical gold per token, regardless of the price of the token. This means that each holder has gold as the downside asset regardless of the token’s performance.

The utility aspect of the IPMB Token offers the potential for the token’s value to be greater than the underlying physical gold backing it. With features such as IPMB-Vantage , which showcases premium goods and service providers accepting IPMB Tokens for payments and the additional launch of their marketplace in 2025, the IPMB Token’s use as a currency for purchase of goods and services allows for its potential price appreciation giving it unlimited upside.

IPMB’s reserves saw overcollateralization throughout the first half of 2024, having more than 2.5 grams of gold per IPMB Token. Source: IPMB - Reserves verified by Grant Thornton

Furthermore, by staking IPMB Tokens up to a year, users can receive up to an 11% discount on physical gold through Globally Exchanged Metal NFTs (GEM NFTs), which represent actual quantities of 24-carat gold that can be redeemed physically.

Bridging digital and physical gold ownership

The GEM NFTs introduce an innovative concept to the market: Stable NFTs backed by gold and pegged to its price. Unlike any other gold ownership method, GEM waives all costs associated with gold ownership and grants potential annual loyalty rewards with the additional staking discount mentioned above, effectively transforming gold into a positive carry asset for the first time. This approach creates a unique dynamic where token holders benefit from the lowest cost access to the stability of gold while potentially earning rewards, adding a new dimension to gold ownership.

Source: IPMB

Furthermore, IPMB’s uniqueness lies in its ability to provide full transparency and traceability of the gold supply chain. By embedding Internet of Things devices and combining it with blockchain technology throughout the supply chain, IPMB allows token holders to trace their gold from its origin mine to the vault where it is stored. Hence their slogan “From the Mine to the Cloud”, solving the well known issues associated with gold sourcing and ethicality.

Blockchain as a part of traditional finance

IPMB’s vision extends beyond just providing a gold-backed digital asset. They aim to bridge the gap between traditional finance (TradFi) and decentralized finance (DeFi) by encouraging the mainstream adoption of tokenized assets. By offering gold-backed tokens and facilitating crypto payments, IPMB envisions a future where blockchain technology and digital assets are at the forefront of the global financial system.

Moreover, as the regulatory landscape continues to evolve, IPMB’s commitment to offering a robust crypto payment system and the establishment of banking licenses and operations in Switzerland, allowing for credit card processing and IPMB debit cards, aligns with broader industry goals of greater transparency and compliance. This strategic alignment positions IPMB as a leader in the tokenized gold market and a significant contributor to the future of global finance.

With the world of digital finance continuing to grow and mature, projects like IPMB highlight the potential for innovation at the intersection of traditional and digital assets. By addressing critical challenges in the TradFi space, tokenization of RWAs, and crypto payments, IPMB aims to help establish a more stable, transparent and inclusive financial future.