Changpeng “CZ” Zhao has challenged Peter Schiff’s plan for a gold-backed token, igniting a debate on the true meaning of “on-chain” assets and highlighting the inherent trust required in the growing market for tokenized real-world assets.
The Core of the Debate
The discussion began when economist and longtime Bitcoin critic Peter Schiff announced his plans to launch “Tgold”, a tokenized gold product. Schiff envisions a system where users can buy gold via an app, store it in a vault, and easily transfer ownership or even spend it using a linked debit card. He positions this as a way to make gold a practical medium of exchange, claiming it fulfills the promises of Bitcoin but with a proven store of value.
In response, Binance founder Changpeng “CZ” Zhao issued a sharp critique, framing the concept as a step away from the core principle of decentralization. He argued that tokenizing gold does not create “on-chain gold”. Instead, it creates a digital promise that relies entirely on a third party to hold the physical metal and honor redemptions in the future. CZ labeled this a fundamental flaw, calling such tokens “trust me bro” assets whose value depends on the custodian’s stability and honesty for decades to come, even through potential crises or war.
What Tokenized Gold Really Means
A gold-backed token is a digital asset where each unit represents ownership of a specific amount of physical gold, like one troy ounce, held in a secure vault. The token’s price is designed to track the market value of gold, offering a way to gain gold exposure with the portability and fractional ownership benefits of a cryptocurrency.
However, as CZ pointed out, this model reintroduces a central point of trust. Investors must rely on the issuer to securely store the gold, conduct regular audits to prove its existence, and maintain the ability to redeem tokens for the physical metal. This structure means you don’t own “gold on the blockchain” but rather a digital IOU from a specific company.
A Niche Market in a Crypto World
Despite the theoretical appeal, gold-backed tokens have seen limited adoption compared to the broader crypto market. The entire tokenized gold sector holds a market capitalization of several billion dollars, which is dwarfed by the over $260 billion market for U.S. dollar-pegged stablecoins.
The market is led by tokens like PAX Gold (PAXG) and Tether Gold (XAUT), which have market caps exceeding $1 billion each. However, the space is fragmented, with no single dominant product setting a universal standard. This lack of a clear leader, combined with lower trading volumes and liquidity, has hindered widespread traction and can lead to challenges like price slippage when trading.
The debate between CZ and Schiff goes beyond a simple product rivalry. It touches on a fundamental question for the crypto industry: can you truly decentralize a physical asset? For now, the market shows that while there is a place for tokenized gold, it remains a niche for those willing to accept custodial risk for the convenience of digital gold ownership.
