Gold has been a store of value for thousands of years. Now it lives on a blockchain. In March 2026, Tether Gold (XAU₮) officially launched on BNB Chain, joining PAX Gold (PAXG) and the Perth Mint Gold Token (PMGT) in a growing market for tokenized precious metals. Each XAU₮ token is backed by one troy ounce of physical gold held in Swiss vaults — the blockchain convenience wrapper around an ancient asset. The World Gold Council is actively pushing for global standards on physical gold tokenization, and institutional appetite is growing as investors want both gold's inflation hedge and blockchain's composability. What the regulators have not yet agreed on is something far more consequential for your tax bill: is tokenized gold a commodity, a crypto asset, or something entirely new?

The Commodity vs. Crypto Asset Classification Problem

The classification question is not academic — it determines your tax rate, your reporting obligations, and in some countries whether you owe anything at all.

In the United States, the CFTC has treated XAU₮ as a commodity derivative, reflecting gold's long-standing classification as a commodity under the Commodity Exchange Act. The IRS, however, has not issued specific guidance on tokenized gold tokens. Under the IRS's existing framework, virtual currency is treated as property, meaning every disposal — sale, trade, or exchange — is a taxable event with capital gains consequences. The more contested question is whether XAU₮ could qualify as a Section 1256 contract (which applies to regulated futures contracts and certain foreign currency contracts), which would allow a favorable 60/40 long-term/short-term split regardless of holding period. Until the IRS publishes explicit guidance, most tax practitioners are treating tokenized gold as property under the general virtual currency rules.

In the United Kingdom, HMRC exempts physical investment gold from VAT, and it is not subject to Capital Gains Tax for most individuals. But tokenized gold is a different matter. HMRC's cryptoasset guidance covers tokens broadly, and it has not carved out an explicit exemption for gold-backed tokens. The working assumption for UK taxpayers is that XAU₮ and PAXG are cryptoassets subject to standard CGT rules, without the VAT exemption that physical gold enjoys.

Germany's treatment is particularly interesting because both physical gold held for more than one year and cryptocurrency held for more than one year can be sold tax-free by individuals under German private sales rules (§ 23 EStG). The question is which bucket tokenized gold falls into. If German tax authorities treat XAU₮ as a crypto asset (which currently seems most likely given the absence of specific guidance), the one-year exemption would still apply — but the analysis is not identical to selling a gold bar. German investors should seek local advice before assuming the exemption covers their tokenized gold holdings.

Australia's ATO has been explicit that all crypto assets are CGT assets. Physical gold receives different treatment under Australian law (it can qualify as a personal use asset in certain circumstances), but there is no indication the ATO would extend that treatment to tokenized gold tokens. Australian holders of XAU₮ or PAXG should apply standard CGT rules, including the 50% CGT discount for assets held more than 12 months.

Country-by-Country Comparison

Country	Tax Authority	Tokenized Gold Classification	Key Rule
United States	IRS / CFTC	Property (crypto asset); CFTC views as commodity derivative	Taxed on disposal; Section 1256 treatment uncertain
United Kingdom	HMRC	Cryptoasset (VAT exemption does NOT apply)	CGT applies; physical gold exemption does not extend
Germany	Bundeszentralamt	Likely crypto asset (§ 23 EStG)	1-year holding period → tax-free for individuals
Australia	ATO	CGT asset	Standard CGT; 50% discount after 12 months
Japan	NTA	Miscellaneous income (general crypto rules)	Gains taxed as misc. income up to 55% marginal rate

Is Redeeming XAU₮ for Physical Gold a Taxable Event?

This is the question most tokenized gold investors eventually face. If you hold XAU₮ and exercise your right to redeem it for the underlying physical gold, does that constitute a "disposal" triggering a capital gain?

Under US tax principles, exchanging one property for another is generally a taxable event. Redeeming a token for physical gold looks like exchanging a crypto asset for a commodity — two different properties. The IRS has not provided a specific ruling on this exchange, but most practitioners believe it would be treated as a disposal of the token at the fair market value of the gold received, creating a capital gain or loss equal to the difference between your cost basis in the token and the value of the gold on the redemption date.

The UK and Australian positions are likely similar — the redemption is a disposal of the cryptoasset, triggering CGT. Germany presents an interesting case: if the token has been held for more than one year, the gain may be exempt regardless of whether the "disposal" is a sale or a redemption into physical gold.

The practical implication: if your tokenized gold position is sitting on significant unrealized gains, redemption is not a tax-neutral event in most jurisdictions. Plan accordingly.

Swapping XAU₮ for PAXG: A Taxable Trade

Swapping Tether Gold (XAU₮) for PAX Gold (PAXG) — or vice versa — is a crypto-to-crypto trade, and nearly every major tax jurisdiction treats such trades as taxable disposal events. Even though both tokens track the price of gold and are economically equivalent, they are issued by different entities on different blockchains. There is no "like-kind exchange" exemption available for crypto in the US (the Tax Cuts and Jobs Act of 2017 limited Section 1031 like-kind exchanges to real property). The same principle holds in the UK, Australia, and Germany.

When you swap XAU₮ for PAXG, you are disposing of your XAU₮ at its fair market value at the time of the swap, and your cost basis in the PAXG becomes that same fair market value. The gain or loss on the XAU₮ disposal is reportable in the tax year of the swap.

This is a particularly important point for investors who view these tokens as interchangeable. Consolidating your position from one issuer to another — perhaps to access better DeFi yields on a different chain — is a taxable event even if the dollar value barely changes.

DeFi Yield on Tokenized Gold: How Is It Taxed?

If you deposit XAU₮ or PAXG into a DeFi lending protocol or liquidity pool to earn yield, the tax treatment of that yield follows standard DeFi income rules in most jurisdictions.

In the US, yield received from depositing crypto assets into DeFi protocols is generally treated as ordinary income at the time of receipt, valued at the fair market value of the tokens received. This applies whether you receive a governance token as a reward, a yield-bearing receipt token, or direct interest payments in gold-backed tokens.

In the UK and Australia, DeFi lending income is similarly treated as ordinary income (or miscellaneous income) at receipt. Germany may treat DeFi yields differently depending on the nature of the activity — some structures may qualify under capital income rules rather than miscellaneous income, but this is highly fact-specific.

An additional layer of complexity arises when the yield itself is paid in XAU₮ or PAXG: you have an income event when you receive the tokens, and a separate capital gain or loss event when you later sell or exchange those tokens. Keep detailed records of the fair market value of every yield receipt.

How dTax Handles Tokenized Gold

Tracking tokenized gold across multiple chains, protocols, and redemption events requires a tool that understands both the commodity-like nature of these tokens and standard crypto tax rules. dTax automatically identifies XAU₮ and PAXG transactions across supported blockchains, applies the correct cost basis method (FIFO, HIFO, Specific ID, and others), and generates jurisdiction-specific tax reports for the US, UK, Australia, Germany, Japan, and more. If you have DeFi yield events on top of your tokenized gold positions, dTax tracks income recognition separately from capital gains so your report is accurate for both.

Frequently Asked Questions

Is tokenized gold taxed the same as physical gold?

No, in most jurisdictions. Physical gold often receives favorable treatment — VAT exemption in the UK, no CGT in some scenarios in Germany for long-term holdings — but tokenized gold tokens like XAU₮ and PAXG are generally classified as crypto assets and taxed under the same rules that apply to Bitcoin or Ethereum. The underlying gold backing the token does not automatically pass its tax treatment through to the token holder.

Does the one-year tax-free rule in Germany apply to XAU₮?

Based on current German tax practice, tokenized gold tokens are most likely classified under the crypto asset rules of § 23 EStG, which means gains from tokens held for more than one year by private individuals can be tax-free. However, explicit guidance from the German tax authorities specifically addressing gold-backed tokens has not been issued. Consult a German tax advisor before relying on this treatment.

What records do I need to keep for tokenized gold?

You need the acquisition date, acquisition price (in your local fiat currency), the number of tokens acquired, and the transaction fees paid for every purchase. For disposals (sales, swaps, redemptions), you need the disposal date, proceeds in fiat, and the specific tokens being disposed of. For DeFi yield, you also need the fair market value of each reward token at the time it was received. Most blockchains provide this data in transaction history, but aggregating it across chains requires a dedicated crypto tax tool.

This article is for informational purposes only and does not constitute tax or legal advice. Tax rules for tokenized assets are evolving and vary by jurisdiction. Consult a qualified tax professional in your country before making any decisions based on this content.