(Kitco News) - Digital gold is emerging as a new pillar of support for the precious metal, and although the market remains in its infancy, the World Gold Council sees an opportunity to unlock hundreds of billions of dollars in new investment demand by transforming the ways that gold is owned, traded and used throughout the global financial system.In a white paper titled Digital Gold: The Case for a Shared Infrastructure, developed with Boston Consulting Group, the World Gold Council (WGC) said the industry is approaching a critical turning point as digital innovation creates new opportunities to expand gold's role beyond a traditional store of value."Our modelling suggests that if stakeholders address the principal barriers to adoption, they can boost both participation and portfolio allocations, unlocking up to $700 billion in latent demand. Fully realised, this would create a market that broadly matches physically-backed gold ETFs today," the report said.The potential is significant. According to the WGC, the market capitalization of tokenized gold surpassed $4 billion in 2025, representing only a fraction of the broader gold investment market. At the same time, gold-backed exchange-traded funds attracted $89 billion in inflows last year, pushing total assets under management to $559 billion.The WGC noted that gold ETFs accounted for 16% of annual gold demand in 2025, highlighting the growing importance of digitally accessible investment products in supporting the precious metal.However, the organization said the next phase of digital gold's evolution will depend on creating the infrastructure needed to make gold more accessible, transferable and useful across financial markets.The WGC is developing its platform “Gold as a Service,” which would connect physical gold custody and vaulting operations with digital issuance, settlement and redemption systems.Rather than creating another gold investment product, the initiative aims to establish shared infrastructure that banks, financial technology companies, bullion dealers and other institutions can use to develop their own digital gold offerings.The WGC said this approach could reduce the substantial costs and operational complexity associated with launching digital gold products, while also improving transparency, liquidity and investor confidence.The initiative could also create new opportunities for gold to be used as collateral, transferred between financial institutions and integrated into digital payment systems.The growing potential of the tokenized gold marketplace was a major topic of discussion during the London Bullion Market Association's annual conference earlier this month.During a panel discussion on digital gold, Mike Oswin, global head of market structure and innovation at the World Gold Council, said the industry is approaching an important inflection point as traditional financial institutions increasingly embrace tokenization.Oswin noted that the retail vaulted-gold and tokenized-gold market currently represents an estimated $50 billion to $60 billion, compared with a broader retail gold investment market of approximately $6 trillion to $7 trillion.The disparity highlights the substantial room for digital gold products to expand their market share.Oswin explained that the industry's challenge is ensuring that gold remains relevant as traditional finance increasingly converges with decentralized financial technology."We can't let it fall behind," he said.Although gold is a physical asset that must be securely stored and managed, Oswin said new technology could make those holdings more useful without sacrificing the security and trust that have historically supported the market.One of the biggest opportunities is turning gold from a passive investment into an asset that can generate greater financial utility.Vincent Domien, head of precious metals trading at ICBC Standard Bank, told delegates at the LBMA conference that tokenization could dramatically expand gold's role in institutional financial markets.He explained that although gold is widely held as a strategic asset, its physical nature makes it difficult to use efficiently as collateral."You have this dead asset on your balance sheet doing absolutely nothing for you," he said.Domien argued that making gold easier to transfer and pledge as collateral could encourage institutions to hold and use more of the precious metal."If you're able to tokenize gold and everybody's able to instantly use it, then suddenly you increase dramatically the use of gold," he said.The WGC shares this view, noting that a more efficient digital infrastructure could allow investors to access liquidity without selling their underlying gold holdings.For example, investors could pledge digital gold as collateral for a loan while maintaining ownership of the precious metal, potentially expanding its appeal as both a long-term store of value and a source of liquidity.Oswin said during the LBMA discussion that modernizing gold's collateral infrastructure could release billions of dollars in previously underutilized assets into financial markets.However, the potential extends beyond institutional investors.James Willis, global head of precious metal sales at HSBC, said the bank's experience launching a digital gold token in Hong Kong demonstrated that new investment formats could attract customers who had previously avoided traditional gold products.Willis explained that customers were attracted to the simplicity of purchasing gold through their banking applications and transferring it to friends and family."The HSBC token in Hong Kong did generate a lot of new clients coming in and buying gold from us," he said.The WGC said digital gold products offering smaller investment minimums, simplified transactions and easier access through mobile platforms could help attract younger investors.However, despite the growing opportunities, significant challenges remain.The report warned that the digital gold market is highly fragmented, with different platforms operating under varying custody arrangements, redemption requirements and regulatory frameworks.The lack of common standards makes it difficult for investors to move their holdings between platforms and creates uncertainty over whether digital products are fully backed by physical gold.The WGC also noted that launching a digital gold product can require tens of millions of dollars in upfront development costs, creating substantial barriers to entry.The proposed Gold as a Service platform is intended to address these challenges by providing a common foundation for physical custody, digital issuance, compliance and redemption.The WGC emphasized that physical redemption remains particularly important for investors, even if they have no intention of taking delivery of their gold.During the LBMA panel, Oswin explained that investors want confidence that their digital holdings represent real metal stored securely in a vault.The organization believes improved auditing, transparency and reconciliation between physical holdings and digital records could strengthen investor confidence and accelerate adoption.In the report, WGC Chief Executive David Tait said the industry must embrace innovation while preserving the fundamental characteristics that have supported gold's role in the financial system for centuries."Today, we stand at a crossroads: gold must adapt to operate confidently within an ever-expanding digital financial system, while remaining true to its physical foundations," he said.The organization stressed that its initiative is not intended to replace traditional physical gold investment or existing financial products.Instead, the objective is to establish another structural source of demand by making gold more useful within the modern financial system.See live precious metals prices for gold, silver, platinum and palladium — in USD, CAD and 12 more currencies.
