A contractual entitlement to exchange an instrument for the underlying asset, subject to the issuer’s stated minimums, fees and delivery terms. In tokenised gold, where the question is normally put as whether a gold token can be redeemed for metal, the right runs against the issuer and not against any identified bar. Exercising it means clearing a minimum expressed in whole bars, passing the issuer’s onboarding, and surrendering the token for permanent cancellation. Where the issuer cannot perform, the right resolves into a claim on the reserve and then into a claim in the insolvency.
What kind of right it is
A redemption right is created by contract. Its terms sit in the issuer’s white paper, terms of service or trust deed, and the issuer writes them: who is eligible, what quantity a claim must reach, how much notice is required, whether settlement is in metal or money, and who bears the cost of moving it. Nothing in the instrument makes the right proprietary. The holder does not own a bar. The holder owns a promise about bars, and that promise ranks alongside the issuer’s other obligations.
Two things can change the character of the right, and both have to be read in the documents rather than inferred from the word.
The first is statute. Where a jurisdiction regulates the instrument, it can convert a negotiable contractual term into one the issuer cannot narrow. The EU’s Markets in Crypto-Assets Regulation (Regulation (EU) 2023/1114) does this for asset-referenced tokens — the category a gold-referencing token falls into, since gold is a referenced value that is not an official currency. Article 39(1) gives holders a right of redemption at all times against the issuer, and against the reserve of assets once the issuer can no longer meet its obligations. Article 39(3) prohibits a redemption fee outright.
The second is segregation. Where the reserve is held on trust or otherwise placed outside the issuer’s estate, the failure of the issuer does not automatically put the holder in the general queue of creditors. Where it is not, it does. An attestation showing that metal exists says nothing about whose estate it belongs to; those are separate questions answered by separate documents.
In kind or in cash: the two ways the right is satisfied
Most redemption policies contemplate both, and the issuer, not the holder, usually decides which applies in a given case. Under MiCA the choice is explicit: the claim may be met in funds equivalent to the market value of the referenced assets, or by delivering the referenced assets themselves.
| In-kind redemption | Cash redemption | |
|---|---|---|
| What the holder receives | Metal, in the bar format the issuer holds | Money, against the value of the referenced asset |
| What sets the amount | The number of whole bars the tokens cover | The reference price at the moment the claim is valued |
| What the holder bears | Fabrication where the format has to change, storage to the release date, insurance, freight, customs, and the carrier’s charge on delivery | The valuation basis and any spread the policy permits |
| Where it fails the holder | The holding does not reach a whole bar | The holder wanted metal and receives a payment instead |
The two routes look like alternatives and behave like a hierarchy. In-kind settlement is the reason a gold token is described as backed rather than referenced; cash settlement is the route that always works, because money divides and bars do not.
How a redemption claim is exercised
The minimum content of a claim filed under an EU redemption plan is specified in the EBA’s Guidelines on redemption plans under MiCAR (EBA/GL/2024/13, applicable 10 February 2025), and it maps closely onto what issuers ask for in ordinary operation.
- Eligibility. The claimant has to be a person the issuer can onboard: a verified direct customer, resident in a jurisdiction the issuer serves. Tokens bought on a venue and held in that venue’s account are held by the venue, not by a claimant the issuer will pay. The holder becomes a claimant only by becoming the issuer’s customer first.
- Filing. The claim identifies the claimant, evidences entitlement, states the number of tokens held — including fractional holdings — names the public blockchain addresses of the wallet holding them, and gives the account for payment or the destination for delivery.
- Screening. Customer due diligence is performed on the claimant at the point of exit, not only at entry. Where an issuer is not itself an obliged entity under EU anti-money-laundering law, the EBA guidelines require it to involve an intermediary that is, so that the checks and the transfer-of-funds obligations are still performed by someone answerable for them.
- Denomination. The holding is measured against the minimum, which is expressed in whole bars of the format the issuer actually holds. A holding below that threshold cannot be settled in metal at all, and the residue above the last whole bar stays in token form.
- Cancellation. Redeemed tokens are collected and permanently removed from circulation — burnt — so that they cannot be recirculated, transferred or sold, and the issuer reconciles tokens claimed against tokens outstanding.
- Settlement. Metal is released or payment is made. Release is not delivery: moving allocated metal is a separate logistics contract with its own carrier, insurance, customs treatment, timetable and documentation.
The record the exercise produces is thin by comparison with the record an allocated purchase produces. Redemption generates a claim file, a due-diligence record, a burn transaction and a delivery or payment confirmation. It does not generate a list of serial numbers held on the claimant’s behalf, because until settlement there were none.
What it costs, and what sets the timing
Fee and cost are different lines, and the difference has been argued in front of a regulator.
A redemption fee is a charge for exercising the right, and in the EU an ART issuer may not levy one. The cost of moving metal is something else: fabrication where a 400-ounce bar has to become kilobars, storage to the release date, insurance, freight, customs duties and import taxes in the destination, and the carrier’s charge. In the consultation on the EBA’s redemption-plan guidelines, the World Gold Council placed that distinction on the record — a delivery charge covering the logistics operator’s costs is not a redemption fee. The final guidelines require issuers to demonstrate that redemption-plan costs do not amount, even indirectly, to a redemption fee, and that liquidation costs are taken from the proceeds only after the amount needed to meet holders’ claims has been set aside.
Timing in normal operation is whatever the issuer’s policy says, and it is revisable by the issuer. Timing in the failure case is not fixed at all. The EBA considered setting a precise deadline for each phase of a redemption plan and declined, on the ground that no such timetable was feasible given the absence of prior experience of the process. What the guidelines require instead is a triggered plan, a public notice, a stated window in which claims must be filed, and a distribution plan — a structure, not a clock.
Where the right stops working
- Below the denomination floor. A holding that does not cover a whole bar has no in-kind route. It can be sold; it cannot be redeemed.
- Outside the served jurisdictions. Issuers close the redemption channel to residents of particular countries. A holder can own a token whose redemption right, as written, does not run to them — the exposure is transferable, the right is not. The inversion is worth noting: in the failure case the EBA requires that the filing route must not discriminate against holders by place of residence, which is a stronger position than many holders occupy while the issuer is solvent.
- Held through a venue. If the tokens sit in an exchange account, the person with the economic interest is not the person the issuer recognises.
- After the trigger. Once a competent authority decides the issuer is unable or likely to be unable to meet its obligations, individual claims are suspended and redemption becomes collective: holders of the same token rank pari passu and are paid from the proceeds of the remaining reserve. One consultation respondent asked the EBA to state that the permanent right is waived on activation. The EBA declined and pointed to suspension instead — the right survives, but it can no longer be exercised one holder at a time.
- The shortfall. Whatever the liquidation of the remaining reserve does not cover is met by the issuer under the applicable insolvency law. That portion is an unsecured claim in an estate, which is what the redemption right was all along in the case that tests it.
- The claim not filed. Missed windows, negatively assessed claims and unredeemed tokens fall outside the guidelines and are left to national law, including limitation periods.
The right is denominated in the token and performed in the bar
This is the fault line, and it is not a detail of any one policy. A token divides to fractions of a gram. A bar does not divide at all. A London Good Delivery bar is not even a fixed weight: it is accepted across a range of roughly 350 to 430 troy ounces at a minimum fineness of 995.0, and the governing figures are the stamped fineness and the line on the weight list, not a catalogue nominal. A redemption right expressed in grams and performed in bars is a promise denominated in one unit and settled in another.
The arithmetic was put to the EU’s banking regulator in plain terms during the 2024 consultation. The World Gold Council’s submission observed that a token may represent one gram of a 12.4 kg Good Delivery bar, and that without a cash option, satisfying that claim in metal means sending the bar to a refinery to be melted and recast into gram bars — at a cost that would likely exceed the value of the gold backing the token. It asked for flexibility: the ability to charge a delivery fee rather than a redemption fee, and the option to settle in cash rather than metal in insolvency.
The EBA recorded the submission in the final report and answered it with the level-1 text: the right of redemption stands at all times, no redemption fee may be charged, and costs are met from the proceeds only after holders’ claims are set aside. The column headed Amendments to the proposals reads: No change. The denomination problem is therefore not an edge case a lawyer invented. It is on the regulatory record, raised by the gold industry’s own body, and unresolved.
The other half of the finding follows from it. The entire apparatus — the minimum, the eligibility test, the claim, the burn, the queue — exists because an instrument stands between the holder and the metal. Remove the instrument and every step disappears with it. Where a counterparty is named in the vault register against bars identified by serial number, held in a dedicated client sub-account at Brink’s Hong Kong or Singapore and segregated from the seller’s own stock, there is no threshold to reach, no claim to file and no queue to join, because title has already passed. The corresponding exit is a buyback: Golden Ark Reserve purchases bars the counterparty already owns at its own quote, settled to the counterparty’s registered bank account. A redemption right and a buyback answer the same question — how the holding turns back into metal or money — from opposite sides of the ownership line. A redemption right is what a holder has instead of title.
The EU makes the same point in the negative. The asset-referenced token regime lifts the redemption right out of contract and writes it into statute — permanent, fee-free, enforceable against the reserve, and supervised through a redemption plan since February 2025. The category has been open since 30 June 2024, and as of August 2026 no asset-referenced token has been authorised under it; the register is empty, and the European Commission opened a consultation on 8 July 2026 on what to do about a category nobody has entered. Gold tokens held by European counterparties are supervised under other frameworks. What they do not carry is the statutory right that category was built to give them.
Terms it is confused with
Buyback. A purchase, not a cancellation. The seller owns the asset before the transaction and receives money for it; nothing is extinguished and no instrument is presented. Redemption cancels a claim; a buyback transfers property.
Issuer claim. The genus. A redemption right is one clause of an issuer claim — the clause describing how, and on what conditions, the claim can be turned into the thing it references. Everything else about the claim, including where it ranks, is unaffected by that clause.
Withdrawal from an allocated holding. An instruction to move property the owner already holds. The operator performs a release against a register entry; there is no minimum set by a counterparty’s commercial policy, no eligibility test beyond identity and sanctions screening, and no possibility that the holding is too small to be represented by an identified bar, because it was identified from the outset.
Allocation by serial number, segregation and the vault register are described at Gold Storage; the exit route for metal already owned is Gold Buyback.