Tokenized commodities look beyond gold as lending and oil open new markets

Tokenized commodities could grow from a market dominated by gold into a broader system for financing metals, trading energy, and borrowing against physical assets, according to senior executives at Paxos Labs, Theo, and Energy Substantiation.

Putting physical commodities onto blockchain networks should ultimately do far more than simply make them easier to buy and hold on digital wallets. Industry leaders argue that tokenization has the potential to seamlessly connect global investors seeking unique market exposure and yield with operating businesses that desperately require flexible inventory financing. By bridging this gap, blockchain-based real-world assets are opening up specialized markets that have traditionally been reserved exclusively for large, well-capitalized financial institutions.

Despite the ambitious long-term outlook, the starting point for this emerging sector remains modest. According to data compiled by CoinGecko, the total market capitalization of tokenized commodities reached $5.55 billion at the end of March 2026, marking a significant expansion from the $1.43 billion recorded at the beginning of 2025. However, this growth has been heavily concentrated, with gold-backed tokens issued by major players like Paxos and Tether accounting for nearly 90% of the entire market valuation.

For the uninitiated, tokenized commodities are blockchain-based digital tokens that represent direct ownership of, or proportional financial exposure to, tangible physical assets such as precious metals and crude oil stored in secure facilities.

Gold lending

Paxos Labs is actively betting that institutional lending will unlock the next major stage of development for the sector.

The company’s PAXGy token is backed by PAX Gold (PAXG), with its underlying physical reserves systematically deployed to institutional borrowers in the commodities space. Each individual token is specifically designed to become redeemable for progressively more PAXG over time as underlying lending rates are successfully paid back to the protocol in ounce terms. This unique mechanism allows long-term token holders to potentially increase their actual physical gold holdings over time while simultaneously retaining full exposure to fluctuations in the metal’s market price.

"The big proposition is access," said co-founder Bhau Kotecha during an interview with CoinDesk. He noted that gold lending and sophisticated yield-generation strategies have historically required a scale and network of institutional relationships that remain entirely unavailable to the average retail investor or smaller corporate entity.

Looking ahead, Kotecha sees robust demand originating from a diverse mix of individual participants, private family offices, and institutional funds. Furthermore, he views allowing users to borrow against their PAXGy holdings as a logical and powerful next step for the product ecosystem. Nevertheless, market observers note that lending returns are never entirely guaranteed, and any unforeseen borrower defaults could potentially erode the underlying value of the token.

Silver offers another compelling alternative route into this sophisticated financing market. Theo’s flagship thSLVR product works by passing steady income derived from institutional silver leases directly to token holders while maintaining their direct price exposure to the underlying precious metal.

Iggy Ioppe, Chief Investment Officer at Theo, believes that the primary engine for future growth will come from existing commodity owners and active market users. This includes major institutions seeking productive collateral to optimize their balance sheets, industrial refiners looking for efficient ways to finance raw inventory, and corporate treasuries searching for robust assets capable of rapid settlement.

Silver serves as "the natural second" asset class to follow gold, Ioppe explained. He pointed to strong underlying industrial demand and an already well-established physical leasing market, even though he acknowledged that greater market volatility and a tighter overall supply of available metal can occasionally complicate the execution of these strategies.

Looking far down the road, Ioppe forecasts that the broader tokenized commodities market will expand into a multi-billion-dollar ecosystem worth tens of billions within the next five years, eventually surpassing the $100 billion threshold within a decade. Looking out 15 years, he confidently expects blockchain tokenization to become a standard, everyday component of ordinary commodity settlement and global trade financing.

The oil test

While precious metals have paved the way, oil presents an exponentially larger logistical challenge and, in the view of Energy Substantiation, an exceptionally substantial commercial opportunity.

The company recently expanded the availability of its WTIC token, migrating and extending the asset from the Ethereum network to Solana. According to the company’s official announcements, each individual token represents exactly one barrel of West Texas Intermediate (WTI) crude oil, which is fully backed by verified physical inventory securely held in storage.

JP Thieriot, co-founder and CEO of Energy Substantiation, revealed that development work is already underway for additional tokens tied to natural gas and Brent crude. He anticipates strong future demand originating from energy buyers seeking to hedge their operational costs, financial investors looking for diversified commodity exposure, and independent suppliers who require immediate working capital. Ultimately, Thieriot predicts that oil-backed tokens could realistically capture up to a quarter of the broader oil market within the next ten years.

Despite the optimism, industry executives hold differing views regarding how rapidly the energy sector can successfully follow the path forged by precious metals. Ioppe argued that the complex physical realities of storage, pipeline transport, and delivery make income-generating energy tokens considerably harder to build and maintain securely. On the other hand, Thieriot emphasized that establishing strictly verifiable inventory, workable institutional custody, and reliable settlement mechanisms are absolute prerequisites for managing commodities that are continuously in physical motion.

Consequently, the broader market expansion of tokenized commodities will ultimately depend on successfully bridging digital tokens with deeply reliable physical markets, while simultaneously providing asset owners with a compelling, practical reason to adopt and utilize them in their daily operations.