Gold’s Paper Problem and the Rise of Onchain Ownership

Gold has surged more than 80% over the past 12 months, making it one of the best-performing assets amid global economic uncertainty. But beneath this buying frenzy, a hidden risk is forming that many investors are overlooking. According to Björn Schmidtke, CEO of Aurelion, a Tether gold-treasury firm, the real threat lies in how most investors actually own gold today.

For many, exposure to gold comes through exchange-traded funds and derivatives often referred to as “paper gold.” While these instruments are convenient and avoid the challenges of storing physical bullion, they do not represent direct ownership of specific gold bars. Instead, investors hold claims or IOUs that are theoretically backed by gold. Schmidtke estimates that roughly 98% of global gold exposure is unallocated, meaning investors cannot identify which physical bars they own, if any at all.

This system has worked largely because few investors ever demand physical delivery. However, Schmidtke warns that in a crisis scenario—such as severe fiat currency devaluation or systemic financial stress—a sudden rush to redeem physical gold could expose serious weaknesses. Physical gold is difficult to transport quickly, and without clear proof of ownership, delivery could become chaotic. In such a “seismic event,” the price of physical gold could spike while paper gold prices lag, leaving ETF and derivative holders unable to settle as expected. Similar dynamics have already appeared in the silver market, where physical premiums have diverged sharply from spot prices.

Schmidtke argues that tokenized, onchain gold offers a solution. Blockchain-based gold tokens like XAUT are directly linked to specific, allocated gold bars stored in Swiss vaults. Each token functions like a digital title deed, providing transparent proof of ownership that can be transferred instantly without moving the physical metal. While physical redemption may still take time, ownership remains clear, traceable, and secure.

This belief has shaped Aurelion’s long-term strategy. The company has shifted its treasury to hold XAUT, emphasizing that how gold is owned matters as much as owning it. With over 33,000 XAUT tokens valued at roughly $153 million, Aurelion sees onchain gold as an early-stage but scalable alternative designed for durable, long-term ownership rather than short-term speculation.