Tokenisation and trust in a modern bullion hub
Singapore is not starting from scratch. Singapore has already emerged as a regional testing ground for digital-asset innovation. Through initiatives such as Project Guardian, the Monetary Authority of Singapore (MAS) has worked with financial institutions and market participants to explore the tokenisation of financial assets and the use of distributed ledger technology in capital markets.
Separately, platforms such as SDAX and DBS Digital Exchange have demonstrated growing interest in regulated digital-asset infrastructure. The next frontier may be the tokenisation of physical commodities, where questions of ownership, custody and redemption become even more critical. The question is whether the same standards of trust and market integrity can be extended to tokenised commodities such as gold.
The shift: From bars to bytes
Traditionally, gold markets have been wholesale and institutional — large bars, professional vaults and established trading networks dominate. Retail investors could access gold, but usually via funds or dealers, with relatively high entry costs.
Now the next phase is being shaped by digital access — tokenisation, which lets gold be split into fractional units and traded on a digital platform. In theory, anyone can own a tiny slice of a bar and transfer it with ease. Lower costs and easier access could broaden participation and deepen liquidity. In layman’s terms, “tokenisation” in the current context may be defined as a blockchain-recorded claim that each token represents a specific quantity of physical gold.
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For a hub like Singapore, this is attractive, but it raises a central question: how can Singapore lead in this next phase while preserving the market integrity and legal certainty that underpin trust?
The bucket-shop, updated
In the early 20th century, “bucket shops” accepted customer orders for commodities but never executed them in the market — they simply took the opposite side and settled internally.
In tokenised gold markets, similar dynamics can emerge, not necessarily through outright misconduct but through ecosystem design:
Internalised trading — A platform may match buy and sell orders within its own system rather than executing them on external bullion markets. Users see price movements and completed trades, but the platform is effectively the counter-party. This is not inherently improper, yet without transparency it replicates the bucket-shop core. Under Section 2(1)(b) of the Commodity Trading Act 1992 (CTA), any business that “facilitates the purchase or sale of a commodity through a contract for future delivery” must be licensed — so an internal-matching platform would fall within the CTA.
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Gold-asset backing — Tokens are marketed as “fully backed” by physical gold, but the linkage may rely on pooled holdings or periodic checks rather than a strict one-to-one match. If issuance drifts from the underlying inventory, investors’ exposure diverges from the real asset.
Redemption rights — Physical bars come in standard sizes (1oz [about 28g] to 400oz). Platforms may let users convert tokens into physical gold but impose minimum sizes, fees or delays that make redemption impractical. For a holder of a 0.01oz token, taking delivery of a 1oz bar is unrealistic: the token then functions more like a price-tracking instrument than a claim on gold.
Pricing and execution — Even when prices reference external benchmarks (e.g., LBMA-quoted spot), the way trades are executed may be opaque. Platforms control spreads and liquidity, affecting outcomes, especially when users cannot see how orders are matched.
Layered intermediation — Tokenised systems often involve issuers, custodians and platform operators. Rights may therefore be contractual rather than a direct ownership claim on physical gold.
Taken together, these features can produce a market that looks like gold trading but operates more like a closed system of price exposure.
Where the law helps — and where it strains
The CTA remains relevant. Although enacted before the rise of digital assets, its purpose is clear: to regulate businesses that allow customers to gain exposure to commodities through intermediated arrangements. It focuses on substance rather than labels. A platform that intermediates trades, sets terms or acts as counter-party therefore falls within the CTA’s scope.
However, the CTA was not drafted for fractional, blockchain-based markets. It does not prescribe how asset-backing is verified or require continuous reconciliation between tokens and physical gold. It also does not set detailed standards for custody segregation or address the mechanics of internal order-matching.
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In practice, this gap means regulators must interpret existing provisions (e.g., “commodity-linked contracts”) and supplement them with guidance — such as MAS Notice 626 on digital payment tokens, AML/CFT obligations, and best-practice custodial standards (e.g., LBMA Good Delivery, third-party audits).
Getting the basics right
Innovation should not be resisted, but trust must be protected. Below are four fundamentals that any tokenised-gold ecosystem in Singapore should secure:
Credible gold-asset backing — Token supply must be tightly tied to physical reserves, with continuous (e.g., weekly) third-party attestation and public, immutable ledger entries showing bar serial numbers, assay certificates and custodial location.
Robust custody and segregation — Custodians should be MAS-licensed or fall under the Trust Companies Act, with clear segregation of token-related gold from other client assets. In the event of a custodian failure, investors’ claims must rank pari passu with other secured creditors.
Practicable redemption — Investors should be able to obtain physical gold without prohibitive barriers. A tiered redemption scheme (e.g., minimum 0.01oz, fees ≤ 0.25 % of token value, settlement within 48 hours) would keep the token a true claim on gold rather than a synthetic exposure.
Transparent execution — Platforms must disclose whether they act as counter-party, how orders are matched (internal vs external), and the benchmark used for pricing. Mandatory post-trade reporting to MAS would enable market-wide surveillance of spreads and liquidity.
A modern hub needs an old principle
The bucket-shop may belong to another era, but the risk it represents — a façade of market activity masking internalised exposure — remains. In a digital market, it can be harder to see and easier to overlook.
Singapore is well-placed to lead the next phase of gold trading. It has credibility, infrastructure and regulatory discipline. By ensuring that tokenised gold remains anchored in real ownership and real assets, Singapore will not only strengthen its position as a gold hub but also set the global standard for digital commodity markets.
Suggested next steps for Singapore
We foresee the following next steps for Singapore:
MAS may consider issuing a “Tokenised-Gold Licensing Blueprint” that codifies backing, custody, redemption and execution requirements.
The creation of a public Gold-Token Registry — a blockchain-based ledger where custodians upload bar data and audit reports.
Adopting the tried-and-tested FinTech Sandbox approach for tokenised-gold pilots with mandatory real-time reporting to regulators.
Alignment with international standards (LBMA Good Delivery, EU MiCA) through Memorandum of Understanding facilitating cross-border settlement.
If these measures are adopted, Singapore can turn the bucket-shop warning into a competitive advantage and become the benchmark for trustworthy, digital bullion trading.
Trust has always been the foundation of commodity markets. In the digital era, Singapore’s competitive advantage will not come merely from tokenising gold, but from creating the world’s most trusted framework for tokenised ownership. If it succeeds, Singapore could become not only a leading bullion hub, but also the global benchmark for digital commodity markets.
Tan Chong Huat is the senior partner and chairman of RHTLaw Asia LLP and chairman of SDAX Exchange. Ch’ng Li-Ling heads the financial services (regulatory) and technology (FSR and fintech) practice of RHTLaw Asia LLP
