Wall Street says tokenization will change global markets. We can see a great deal of danger with tokenization. So let’s dig in and ask the hard questions, such as, can physical gold protect you from tokenization?
Physical gold and silver can protect you from the risks associated with tokenization by offering direct ownership, eliminating counterparty risk, and providing a tangible asset independent of technology or the financial system.
Key ways physical gold protects you:
- No Counterparty Risk: With physical gold that you hold yourself (or is allocated and segregated in a secure vault under your name), you have direct ownership of the asset itself. Tokenized gold, while representing a physical asset, still relies on the issuer and a third-party custodian to manage the underlying gold, introducing the risk that these entities could default, face fraud, or mismanage the assets.
- Immune to Technology Failures: Physical gold ownership is independent of the internet, blockchain networks, smart contracts, or digital wallets. This means it is immune to cyberattacks, network outages, or technological bugs that could affect tokenized assets.
- Complete Privacy: Owning physical gold and silver in your possession allows for complete privacy, as there are no digital records of ownership or transactions on a public or private ledger unless you choose to create them.
- Immediate Accessibility: You have immediate access to your physical gold without needing to go through a redemption process or rely on a platform’s operating hours, which can be a key advantage during times of extreme financial or geopolitical stress.
- Tangible and Historically Resilient: Gold has served as a reliable, tangible store of value and a hedge against severe economic disruptions for thousands of years, offering psychological comfort that digital assets may not provide during a crisis.
- Regulatory Independence: The regulatory landscape for tokenized assets is still evolving and varies by jurisdiction. Physical gold ownership is well-established within existing legal and tax frameworks (though tax treatment may vary), providing more certainty for long-term wealth preservation.
While tokenization offers convenience, liquidity, and fractional ownership, one needs to be fully aware of the risks mentioned earlier. Physical gold and silver offer the ultimate security through their tangibility and independence from digital and financial system vulnerabilities.
