Solana’s proposal to double its annual disinflation rate has cleared a governance vote with 67% support, placing the network on course to reduce projected SOL issuance by 18.9 million tokens over six years.

Solana inflation proposal narrowly clears required vote

Solana’s official governance dashboard showed that SGP-0002, called Double Disinflation, finished voting with 176.29 million SOL in favor, representing 67% of the participating stake.

Another 66.19 million SOL, or 25.16%, opposed the proposal, while 20.63 million SOL, or 7.84%, abstained. Voting participation reached 60.7%, representing 433.49 million SOL and exceeding the one-third quorum required under Solana’s governance rules.

Under the Solana governance process, a proposal passes when at least one-third of network stake participates and two-thirds of all participating stake votes in favor. Abstentions count toward both participation and the total used to calculate support, leaving SGP-0002 only slightly above the required 66.67%.

The result provides a stake-weighted mandate to proceed with faster disinflation. It does not immediately reduce SOL issuance because an SGP establishes the network’s preferred direction, while a Solana Improvement Document specifies the technical changes required to carry it out.

SIMD-0550, written by Helius contributors Lostin and 0xIchigo, would increase the rate at which SOL inflation declines each year from 15% to 30%. Rather than cutting the current inflation rate in half at once, the proposal would make inflation fall twice as fast from its level when the change becomes active.

According to the SIMD-0550 specification, Solana would reach its existing terminal inflation rate of 1.5% in about 2.8 years, compared with 5.7 years under the current schedule. The authors estimate that the change would remove 18.9 million SOL from projected issuance over six years, or about 2.6% of the supply expected under the present schedule.

Faster disinflation still requires a technical rollout

Although the governance dashboard labels SGP-0002 as finalized, SIMD-0550 remained under “Review” in Solana Foundation’s improvement document repository at the time of writing. The document’s feature field also did not identify a completed implementation or an activation schedule.

Before mainnet activation, validator clients must add and support a feature gate called double_disinflation_rate. The technical document says the feature would activate at an epoch boundary, with the faster schedule applying to rewards from the following epoch.

Developers designed the change to keep issuance continuous at activation, according to SIMD-0550. Solana would re-anchor its inflation formula at the activation slot, preventing an immediate drop in the rate or a retroactive change to rewards already earned.

Because inflation rewards affect Solana’s bank capitalization and bank hash, every validator client must calculate the new schedule in the same way. A difference between implementations could cause nodes to arrive at conflicting network states, making the proposal a consensus-level change rather than a simple adjustment to validator settings.

The technical document said the feature gate must remain in client software permanently so nodes replaying Solana’s history can apply the correct inflation rate before and after activation. Rewards from completed epochs would remain unchanged.

Solana previously considered SIMD-0228, which linked emissions to staking participation instead of following a fixed reduction schedule. The proposal failed to reach quorum in March 2025 after validators and other participants raised concerns about staking income, validator economics and the complexity of the model.

SIMD-0550 uses a fixed schedule that does not respond to changes in staking participation. The authors said the design would preserve a predictable inflation path while avoiding a sudden reduction that could place immediate pressure on validator revenue.

Resource-fee proposal fails to reach two-thirds support

Alongside SGP-0002, Solana voters rejected SGP-0003, the Resource and Inclusion Fee proposal, despite 61.14% participation.

The final tally showed 53.9% support, 18.92% opposition, and 27.18% abstentions. Support therefore fell almost 13 percentage points below the two-thirds threshold.

SGP-0003 asked validators and delegators to support SIMD-0553, which would replace Solana’s flat base-fee model with a 2,500-lamport inclusion fee and a separate charge based on the resources requested by each transaction. Validators would receive the inclusion and priority fees, while the protocol would burn the full resource-based portion.

Solana currently charges a base fee of 5,000 lamports per signature, split equally between burning and payment to the block-producing validator, according to the network’s documentation. Priority fees go entirely to validators.

The SIMD-0553 fee model proposed three resource-fee stages. Using May 2026 network activity, its authors estimated daily burns of 1,500 to 1,800 SOL at the first stage, 3,750 to 4,500 SOL at the second, and 7,500 to 9,000 SOL at the final rate. Solana currently burns about 648 SOL per day through its flat fee.

Even at the highest proposed rate, the document estimated that the added burn would equal about 0.5% of supply annually against an inflation rate of roughly 3.8%. SIMD-0553 therefore did not project that the fee model alone would make SOL a net-deflationary asset.

Transaction costs would also have varied according to the requested network resources. The proposal estimated that a simple validator vote could cost 12.3% less, while one zero-priority Pump.fun swap used as an example could face an increase of 3,150%. Applications setting compute limits well above their actual needs would pay more because the fee would use requested resources rather than the amount ultimately consumed.

US-listed Solana products face lower staking income

Opposition to both proposals included Solana Company, a Nasdaq-listed digital asset treasury firm trading under the ticker HSDT. In an Aug. 21 statement, the company said it supported lower issuance and resource-based fees as long-term goals but opposed changing two established economic parameters during Solana’s first formal governance cycle.

As crypto.news previously reported, Solana Company said institutions rely on stable staking yields and predictable transaction costs when preparing forecasts, audited reports and operating budgets.

The company said staking yield represents operating cash flow for some token holders and argued that reopening the established inflation schedule could create uncertainty for institutions evaluating validator operations. It also said variable fees would transfer estimation risk to users and operators before their systems were prepared.

“Institutional adoption is a critical driver of Solana’s growth, and institutions make decisions based on consistent, predictable structures,” Solana Company chairman and CEO Joseph Chee said.

Faster disinflation could also affect US investors holding staking-based Solana products. The Bitwise Solana Staking ETF held 8.18 million SOL valued at about $622 million as of Aug. 9, with 99% of its assets staked and a reported net staking reward rate of 5.84%, according to a recent Bitwise fund report.

Grayscale has separately planned quarterly staking distributions for its Solana Staking ETF. Its filings said shareholder payments would depend on rewards received by the fund, operating costs, management arrangements, and applicable tax treatment.

Network use has climbed while Solana considers the lower issuance path. July transactions reached a record 4.2 billion, rising 13.5% from June and about 91% from December 2025, according to an Aug. 25 network activity report. Blockworks data cited in the report also showed 1.32 billion non-vote transactions between Aug. 17 and Aug. 23, the network’s busiest seven-day period on record.

Federal Reserve Chair Kevin Warsh has put another interest-rate increase on the table after saying inflation remains well above the Fed’s 2% target, sending Bitcoin below $80,000 as traders raised their rate-hike bets.

Warsh says inflation must return to 2% faster

The Federal Reserve’s published remarks show that Warsh made price stability the central focus of his first Jackson Hole keynote as chair, describing the 2% PCE inflation goal as a “firm, fixed target.”

Warsh said the Fed’s preferred measure, the 12-month change in the Personal Consumption Expenditures price index, stands at 3.7%. The six-month change has reached 4.1%, while comparable headline and core Consumer Price Index readings also remain elevated.

“So the Fed’s predominant focus right now should be on prices,” Warsh said.

Although the summer PCE and CPI reports came in better than expected, Warsh said the releases did not show that underlying inflation trends had “meaningfully improved.” Progress from the inflation highs reached in 2022 has also been modest during the past two years, he added.

Looking beneath the headline figures, Warsh said 54% of the 199 goods and services in the PCE basket recorded price increases above 3% during the past 12 months. The share was lower than the post-pandemic peak of about 77% but remained far above the 32% average recorded during the two decades before the pandemic.

Over the past six months, 49% of the basket posted annualized price increases above 3%, according to the Fed chair. Commodity prices have also risen recently, leaving policymakers to assess whether the move could add to inflation risks.

“We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do,” Warsh said.

Warsh did not commit to a specific interest-rate decision, saying he was committed to a policy discipline rather than a predetermined outcome. However, Jake Kennis, senior research analyst at Nansen, told crypto.news that the wording left additional increases available if inflation remains elevated.

Kennis described the speech as clearly hawkish, pointing to Warsh’s statement that he would be “hard pressed to describe broad financial conditions as restrictive.”

“He added the Fed has ‘work to do’ unless inflation moves to 2% ‘clearly and at sufficient speed,’ which is a signal that rate hikes are on the table if elevated inflation persists.”

Strong US economy gives the Fed room to act

Warsh’s inflation warning came alongside an upbeat assessment of the American economy, which the Fed chair said appeared to have strengthened despite pressure in housing and agriculture.

Business investment in equipment and intangible assets has grown by about 9% over four quarters, its fastest pace since 2021, according to the speech. Warsh attributed more than half of this year’s capital-expenditure growth to the artificial intelligence buildout.

S&P 500 company profits have climbed by more than 20% during the past year, while corporate bond and leveraged-loan spreads remain near the lower end of their historical ranges. Strong issuance and comparatively easy bank-lending standards led Warsh to say that credit markets show few signs of policy restraint.

Labor conditions have also remained stable. The unemployment rate stands at 4.1%, while the four-week average of jobless claims remains close to its lowest level in decades, according to Warsh.

At the July meeting, most Federal Open Market Committee members voted to wait for more information before changing rates, even as policymakers agreed that inflation remained too high. Warsh said the committee also expressed a shared readiness to respond if conditions required action.

For American investors, the Fed’s next decision could affect Treasury yields, the dollar and prices across risk assets, including US-listed spot Bitcoin exchange-traded funds. Polymarket contracts cited in the supplied report placed the probability of at least one rate increase during 2026 at 68%, up from less than 50% a week earlier.

The prediction market placed the chance of a 25-basis-point increase at the September meeting at about 50%, while the probability of no change stood near 51%, with rounding and changing trades allowing the displayed figures to overlap. August CPI and PPI reports due before the meeting will give policymakers more data on whether price pressure is easing.

Bitcoin falls below $80,000 after Warsh’s speech

Following the keynote, Bitcoin fell from an intraday level above $80,000 to about $79,200, leaving the asset down nearly 2% on the day.

The decline interrupted a rally that had carried Bitcoin above $80,000 on Aug. 25 for the first time in almost 15 weeks. As previously reported, BTC had gained about 28% in eight days and tested resistance between $80,000 and $82,000 after US spot ETFs attracted approximately $1.92 billion in weekly inflows.

Before the speech, Nicolai Sondergaard, senior research analyst at Nansen, said Bitcoin’s higher-timeframe trend remained bullish, but several shorter-term measures had become less convincing. He cited crowded long funding, contracting open interest, fading ETF trading volume, and mixed exchange flows.

Sondergaard said the importance of the address would come from its effect on interest rates, the dollar and the Fed’s response to new economic data, rather than a simple hawkish-versus-dovish label.

“A hawkish signal is more dangerous because it hits crowded longs. For upside to stick, we need lower yields, stable dollar liquidity, improving CVD and BTC holding above roughly $80.4k with OI expanding.”

Without those conditions, Sondergaard described the setup before the keynote as a “fragile bullish structure, not a high-conviction breakout.”

Positioning had already become vulnerable before Jackson Hole. Bitcoin previously fell 4.1% from $81,238 to $77,870, while long liquidations reached about $270 million across the crypto market. Bitcoin futures open interest dropped roughly 4.5% from the level recorded around the $81,238 peak.

Bitcoin options expiry clears $6.4 billion overhang

Warsh delivered his speech after approximately $6.4 billion in Bitcoin options expired on Deribit at 08:00 UTC on Aug. 28, clearing a large block of contracts shortly before the market reacted to his comments.

The options expiry included roughly 81,700 contracts, comprising 44,639 calls and 37,061 puts. Calls outnumbered puts at a ratio of 0.83, with the largest concentrations sitting around the $75,000 and $80,000 call strikes.

Lacie Zhang, research analyst at Bitget Wallet, said the positioning showed constructive rather than euphoric confidence. Calls trading at higher premiums than comparable puts suggested that traders were paying for exposure to further gains after Bitcoin’s rally instead of heavily buying downside protection, she added.

“The $6.4 billion notional should not be read as a directional bet, since much of it reflects hedged dealer books and spread positions.”

According to Zhang, strike concentrations mattered more for price pinning and dealer hedging before settlement. With the contracts now expired, she said traders should watch whether open interest returns at higher strike prices and whether call premiums remain elevated across September and December maturities.

“If it does, that would confirm more durable bullish conviction; if skew normalizes quickly, the move was mainly expiry-specific positioning,” Zhang said.

Strive’s SATA preferred stock has generated an estimated amount of funding sufficient to purchase 1,192 Bitcoin this week, according to live market monitoring.

SATA has reopened Strive’s Bitcoin funding channel

BitcoinTreasuries.NET estimated on Aug. 28 that trading in Strive’s Variable Rate Series A Perpetual Preferred Stock, known by its ticker SATA, had generated enough funds to purchase about 1,192 BTC during the week.

The running figure continued to rise after the U.S. market opened on Friday. Within the first two hours of trading, the tracker estimated that SATA had added funding capacity for more than 100 BTC.

BitcoinTreasuries.NET calculates the figure using SATA volume at or above its $100 stated value and an estimated capture rate based on Strive’s previous filings with the U.S. Securities and Exchange Commission. The model attempts to estimate how many new shares Strive may sell through its at-the-market offering program.

Because the tracker relies on market activity rather than a company disclosure, the 1,192 BTC figure does not confirm that Strive has already purchased the coins. Strive has not filed an 8-K detailing any Bitcoin acquisitions made between Aug. 24 and Aug. 28.

At Bitcoin prices of roughly $78,000 to $80,000 during the week, the estimated purchasing capacity would amount to approximately $93 million to $95 million. The final amount could differ because issuance expenses, Bitcoin prices, and the portion of eligible SATA volume captured by Strive can change during each session.

An earlier update from BitcoinTreasuries.NET put Thursday’s running total at 1,084 BTC after SATA recorded about $50 million in daily trading volume. Additional trading on Friday raised the estimate to 1,192 BTC before the end of the session.

Advertisement

The $100 SATA price has allowed issuance to resume

SATA carries a stated value of $100 and pays a variable annual dividend based on that amount. Strive currently maintains the annualized rate at 13%, with payments made every business day when declared by its board.

Strive has said it will not issue new SATA shares below $100 because doing so would raise less than the security’s stated amount and dilute existing preferred holders. Trading at or above par allows the company to sell new shares through its ATM program and direct the net proceeds toward Bitcoin or other permitted corporate uses.

During a June sell-off in Bitcoin-linked securities, SATA fell as low as $79.01, according to BitcoinTreasuries.NET. The decline prevented Strive from using the preferred-stock ATM program on its stated terms for several weeks.

Advertisement

By Aug. 21, SATA had returned to $100.01, reopening the issuance channel. The tracker estimated that the program generated enough capital to purchase about 440 BTC over Aug. 20 and Aug. 21 alone.

The recovery followed a period when SATA gradually approached par. On Aug. 19, crypto.news reported SATA nearing par as Strive director Pierre Rochard purchased 15,900 ASST common shares for $199,386. Rochard paid an average price of $12.54 per share in his first reported direct purchase of Strive common stock.

Strive launched SATA on Nasdaq in November 2025 through an upsized initial public offering of two million shares priced at $80 each. According to the company, demand led it to increase the offering from an initial target of 1.25 million shares.

The preferred stock initially carried a 12% annual dividend, which Strive later increased to 13%. Its $100 liquidation preference places SATA ahead of common shareholders in Strive’s capital structure, while its perpetual design means it has no fixed maturity date.

Advertisement

In June, Strive expanded its available ATM capacity to as much as $2.6 billion for SATA and $2.55 billion for ASST common stock, according to SEC filings. The programs permit Strive’s appointed sales agents to issue shares into the market over time rather than completing one large underwritten offering.

Strive entered the week holding 21,356 BTC

A Form 8-K filed with the SEC on Aug. 24 showed that Strive purchased 1,110 BTC between Aug. 17 and Aug. 21 for about $81.5 million. The company paid an average of approximately $73,409 per coin, including fees and expenses.

The purchases increased Strive’s holdings from 20,246 BTC to 21,356 BTC. BitcoinTreasuries.NET ranked the company as the seventh-largest publicly traded corporate Bitcoin holder, behind Bullish with 22,000 BTC and ahead of SpaceX with 18,712 BTC.

During the same Aug. 17–21 period, the number of SATA shares outstanding rose by 441,313 to 8,270,815, according to the filing. Strive’s Class A common shares increased by 3,646,300 to 79,890,888.

Advertisement

The filing did not divide the purchase funding among SATA issuance, ASST common-stock sales and existing cash. BitcoinTreasuries.NET estimated that SATA activity on Aug. 20 and Aug. 21 could have provided enough money for about 440 BTC, leaving the remainder potentially funded through common shares, cash or a combination of the three.

Strive’s cash and cash equivalents increased by $17.1 million during the same period, reaching $171.9 million after the company completed the 1,110-BTC purchase. Its holding of Strategy’s STRC preferred stock remained unchanged at 505,000 shares, while the position’s reported fair value rose by $707,000 to $48.57 million.

Strive has expanded its Bitcoin holdings rapidly since SATA began trading. The company held 7,525 BTC in November 2025, meaning its disclosed balance had increased by 13,831 BTC, or about 184%, by Aug. 21.

In June, Strive made another large purchase when it acquired 759 BTC for about $50 million at an average price of $65,850. The 759 BTC acquisition lifted its holdings to 19,864 BTC and exceeded Strategy’s purchase of 520 BTC during the same reporting period.

Advertisement

An earlier May filing showed that Strive bought 1,109 BTC for $85.4 million, paying an average of $76,988 per coin. The May Bitcoin purchase raised its holdings to 16,500 BTC and moved the company ahead of Coinbase and Riot Platforms in the public-company rankings at the time.

U.S. investors face separate SATA and ASST risks

For U.S. investors, SATA and ASST provide two different forms of exposure to Strive’s Bitcoin strategy through Nasdaq-listed securities. SATA holders receive preferred dividends when declared, while ASST holders own the company’s common equity and bear the effects of changes in Bitcoin holdings, financing costs, and share issuance.

Strive described SATA in its second-quarter report as the first listed security in U.S. capital markets to pay cash dividends every business day. Chief executive Matthew Cole said the company had become “debt-free, with zero margin requirements, and zero encumbered Bitcoin.”

The SEC filing identifies dilution from additional ASST or SATA issuance as a risk to investors. SATA also creates a continuing preferred dividend obligation because the shares are perpetual and have no scheduled maturity.

Advertisement

Strive’s second-quarter balance sheet listed $702.4 million of SATA preferred equity and a $783 million redemption value as of June 30. The company reported $26.2 million in SATA dividends within its adjusted net loss attributable to common shareholders for the quarter.

Strive recorded a second-quarter GAAP net loss of $257.6 million, with $234 million attributed to lower fair values for its Bitcoin and STRC holdings. As of Aug. 7, the company reported $154.9 million in cash, $48 million of STRC preferred shares, and no outstanding short- or long-term debt.

Commitment prior to permitting: Binding community and grid compacts must precede site approvals.

Proportionality: Infrastructure and community asks must scale directly with peak megawatt demand.

Enforceable security: Pledges must be backed by letters of credit, escrow reserves, or parent-company guarantees.

Statewide baseline floors: Establish statewide statutory floors to prevent developers from regulatory arbitrage across county lines.

Bullish, an institutional crypto exchange and market infrastructure operator, has agreed to extend a $100 million stablecoin-backed debt facility to USD.AI to fund loans secured by GPU hardware. The companies said the financing will support onchain lending to AI infrastructure operators, with collateral tied to the computing equipment rather than the borrowers’ broader corporate balance sheets.

The move reinforces USD.AI’s strategy of turning stablecoin liquidity into GPU infrastructure credit, while giving Bullish an additional pathway to deepen liquidity around GPU-backed tokenized debt through a dedicated trading and market-making effort.

Key takeaways

• Bullish is providing a $100 million stablecoin-based debt facility to USD.AI for GPU-secured lending.
• USD.AI’s loans are collateralized by the underlying GPU hardware, not general corporate assets.
• Bullish plans to list USD.AI’s sUSDai across multiple trading pairs and run a market-making program to support liquidity.
• The facility builds on USD.AI’s recent GPU-backed financing activity, including loans tied to Nvidia B300 and B200 GPU configurations.

Stablecoin credit aimed at GPU-backed collateral

Under the announced arrangement, USD.AI will deploy the facility by extending financing to AI infrastructure operators whose repayment claims are secured by the GPUs themselves. The structure is designed to reduce reliance on general corporate collateral by anchoring loan exposure to specific, identifiable computing hardware.

USD.AI is an onchain financing platform built by Permian Labs. It positions itself as an intermediary between stablecoin liquidity and the funding needs of the GPU infrastructure sector, where capacity purchases and deployments often require large upfront capital outlays.

Bullish plans token support and tighter secondary liquidity

Bullish said it intends to list USD.AI’s sUSDai token across multiple trading pairs. It also plans to back the token with a dedicated market-making program, aiming to improve secondary liquidity and strengthen price discovery for debt products linked to GPU collateral.

For market participants, the practical significance is that tokenized, asset-backed credit can become easier to access and hedge when trading venues and market makers provide consistent bid-ask liquidity. Bullish’s involvement suggests it wants this GPU-backed financing stack to be more than a primary-deal story, with ongoing tradability playing a larger role.

Growing GPU financing footprint

This $100 million facility expands USD.AI’s GPU-linked lending business. In June, USD.AI announced a $98.1 million loan backed by 2,304 Nvidia B300 GPUs. Around the same time, it also disclosed that a $34 million loan backed by 768 Nvidia B200 GPUs had been fully funded.

Taken together, those earlier announcements highlight a pattern: USD.AI’s lending is tied to identifiable GPU batches and configurations, and its ability to complete funding rounds indicates demand for this style of AI infrastructure credit. With Bullish adding a larger stablecoin debt line, investors and operators may expect USD.AI to scale the volume of GPU-secured financing more quickly, assuming ongoing collateral sourcing and operational rollout can keep pace.

Previous Bullish investment adds continuity

The deal also follows earlier capital support from Bullish Capital. According to the companies, Bullish Capital made a $4 million investment into USD.AI in September 2025—described by Bullish as its first investment since going public.

That continuity matters because it suggests Bullish is not treating the current facility as a one-off product test. Instead, the firm appears to be expanding an existing relationship into a larger operational role—using stablecoin-backed debt infrastructure alongside trading and liquidity initiatives.

More broadly, the arrangement underscores a growing intersection between digital asset market infrastructure and AI hardware financing, where stablecoins and onchain credit mechanics can potentially shorten the path from liquidity to real-world infrastructure commitments.

Investors should watch how sUSDai trading develops after listing and whether Bullish’s market-making program meaningfully improves liquidity depth over time. Equally important will be how USD.AI manages loan origination, GPU collateral custody, and the operational mechanics of hardware-backed repayment as deal sizes scale under this new facility.

X user Crypto with Haris ₿ also gave his two cents on the matter, forecasting a price explosion for the meme coin to $20 before Donald Trump steps down as the President of the United States.

The token saw the light of day right before his inauguration in January 2025 and entered the space with a storm. At one point, its price skyrocketed to nearly $70, while its market capitalization soared past $14 billion. Thus, TRUMP briefly became the second-largest meme coin after flipping Shiba Inu (SHIB). Since then, though, the token has experienced a massive overall downfall, currently trading 96% below its historic peak.

Earlier this week, Crypto with Haris ₿ made another comment related to the meme coin. He advised investors to stay away from TRUMP and MELANIA, describing them as “scam tokens” in which only insiders can make money while retail investors always lose.

The meme coin is indeed primarily driven by speculation and hype rather than fundamentals, meaning traders and investors willing to jump on the bandwagon should be extra careful. TRUMP’s holder distribution should serve as another red flag. According to CoinMarketCap, the top 10 addresses control over 90% of the token’s supply, increasing the risk of price manipulation.

Tokenized gold has moved deeper into crypto lending after Aave’s XAUT-backed debt reached a $25 million ceiling and Arch Lending added loans against the two largest gold tokens.

Arch co-founder and chief technology officer Himanshu Sahay told crypto.news that demand for tokenized gold loans shows holders are beginning to treat the assets as usable parts of the digital financial system, rather than only as a way to track bullion prices.

“The most interesting thing about the demand we’re seeing around tokenized gold is that people aren’t just treating these assets as a way to get exposure to the price of gold. They’re increasingly looking at them as something that can be put to work within the broader crypto financial system.”

Demand recorded on Aave provides one example. In late January, the decentralized lending protocol’s XAUT market reached its $25 million debt ceiling, according to a Chaos Labs assessment.

Chaos Labs recommended raising the ceiling to $30 million after finding demand to use XAUT as collateral for stablecoin borrowing. Within days, the risk manager reported that the added capacity had filled in less than 24 hours and proposed staged increases to $36 million, $43 million, and eventually $50 million.

Aave demand has tested tokenized gold lending capacity

Although the Aave activity showed that investors were willing to borrow against tokenized bullion, Chaos Labs found that the market was highly concentrated. Its February assessment said the largest position accounted for more than 75% of all debt secured by XAUT.

The same report described the users’ health factors as moderately safe and cited XAUT’s liquidity and relatively conservative volatility when assessing liquidation risk. Aave listed XAUT in isolation mode, preventing holders from using the asset to borrow more volatile tokens.

Initial parameters allowed users to borrow up to 70% of their XAUT collateral’s value, while liquidation could begin at 75%. The arrangement treated XAUT as collateral only, meaning users could supply it to support debt but could not borrow the gold token itself.

Sahay described the January activity as more meaningful than a one-time jump because the extra capacity was also used quickly. According to him, the demand indicates that “the collateral itself is becoming useful.”

Current balances require a separate reading from the January episode. Aave’s Ethereum v3 reserve page recently showed about $70 million of XAUT supplied but no XAUT-backed debt, according to figures provided by Sahay. He said the earlier borrowing should therefore be treated as historical evidence of willingness to use the asset, rather than a description of Aave’s present debt balance.

Recent activity has also extended beyond lending. An August CoinShares report found that real-world asset deposits had tripled to $7.4 billion even as DeFi activity declined, with XAUT and PAXG producing much of the measured spot activity. As reported earlier this month, traders used the two tokens to change their gold exposure as bullion prices moved.

Tokenized gold lets holders borrow without selling

For investors who still want exposure to gold, Sahay said borrowing and selling meet different financial needs. A sale closes the position, while a collateralized loan supplies cash or stablecoins without requiring the investor to give up the asset immediately.

“If an investor sells their gold exposure, they have exited the position,” Sahay said. “Borrowing allows them to access liquidity while retaining exposure to the underlying asset.”

Tokenization reduces some practical barriers because the collateral already exists on a blockchain. Holders do not have to transport physical bullion into a lending arrangement or arrange separate storage before seeking a loan.

PAXG and XAUT each represent a claim linked to physical gold, although their legal and operational structures differ. Paxos says one PAXG represents one fine troy ounce of London Good Delivery gold held in professional vaults. Tether says one XAUT represents one fine troy ounce of gold held in Switzerland.

On Aug. 28, Tether’s website placed XAUT’s market capitalization at approximately $3.27 billion, while CoinGecko valued PAXG at about $1.93 billion. The figures give the two products a combined market value of approximately $5.2 billion.

Tokenized gold previously reached another milestone in March when Tether deployed XAUT on BNB Chain. The BNB Chain expansion gave the token another settlement network alongside its existing infrastructure, while each unit remained tied to an ounce of physical bullion.

Sahay cautioned that digital access does not remove the dangers created by debt. In his view, a lending service still needs suitable LTV limits, custody arrangements, and risk controls because collateral can be liquidated when its value no longer supports the outstanding loan.

“The fact that an asset can be used as collateral doesn’t mean it should be leveraged aggressively,” he said.

Gold and Bitcoin serve different collateral needs

Rather than presenting tokenized gold as a replacement for Bitcoin, Sahay said the assets offer different characteristics to borrowers and lenders.

Bitcoin has more established liquidity across crypto markets and plays a central role as a native digital asset. Gold, however, has a much longer record as a store of value and has historically experienced less price volatility than Bitcoin, according to Sahay.

Gold-backed tokens may therefore appeal to investors who want on-chain borrowing without taking the same level of directional exposure associated with Bitcoin. The blockchain token still introduces risks tied to its issuer, custodian, smart contract, and redemption terms, even when the underlying bullion moves less sharply than BTC.

“I don’t think tokenized gold replaces Bitcoin as collateral. I think it expands the range of assets that can support crypto-native liquidity.”

His comments follow a previous interview in which he identified qualified custody, zero rehypothecation and clear collateral rules as safeguards for digital-asset loans. The custody discussion also covered margin calls and liquidations, which can force a sale when borrowers fail to add collateral or reduce their debt.

Arch has added PAXG and XAUT-backed loans

Within that developing market, Arch Lending has started accepting PAXG and XAUT as collateral at up to 75% LTV, according to information supplied by the company. Anchorage Digital will hold the pledged tokens.

Arch says it does not rehypothecate borrower collateral, meaning the assets are not lent to another party to produce revenue. Its website states that Anchorage holds collateral in segregated wallets and that Arch uses partial liquidations intended to sell only the amount required to restore a loan’s health.

The company’s public website has not yet added PAXG and XAUT to its displayed list of supported assets, which still names BTC, ETH and SOL and shows an LTV of up to 60% for existing loans. The 75% limit and support for both gold tokens therefore come from the company’s new product information.

Competitors already offer parts of the same service. Nexo says eligible customers can borrow against PAXG or XAUT, subject to location and account requirements, while YouHodler and CoinRabbit advertise PAXG-backed products. Ledn announced XAUT-backed lending in June but said the service would become available later in 2026.

US borrowers face tax, access and liquidation questions

For US investors, borrowing against an appreciated digital asset generally differs from selling it because the Internal Revenue Service treats a sale or other disposal as an event that requires the owner to calculate a capital gain or loss. A loan does not involve the same immediate disposal, although a lender’s sale of collateral may create tax consequences.

Individual circumstances, loan structures and liquidation events can affect reporting, and the IRS advises digital-asset owners to keep transaction records and consult a qualified tax professional when necessary.

Arch operates legally as ChainFi Inc. and provides loans to US borrowers under NMLS number 2637200. Its disclosures state that product availability and interest rates vary by jurisdiction, loan type, and principal amount.

According to the company’s current state restrictions, loans are unavailable to individual residents of California, Delaware, Hawaii, Maryland, Mississippi, Montana, Nevada, North Dakota, Rhode Island, South Carolina, and Vermont. Arch also requires borrowers to complete identity checks before transferring collateral and receiving USD or USDC.