Procurement spread is the margin an asset backed token issuer captures between what it pays to source the underlying and the benchmark price it uses to set NAV. It sits upstream of the holder, before any disclosed fee applies, which is why a headline creation fee of zero can still sit on top of a profitable issuance business.
The disclosed fee tells you what the holder pays at the door. The procurement spread tells you what the issuer earns before the holder arrives, and only one of those two numbers is usually published.
Two different spreads keep getting called one thing
The creation fee is a price charged to the user at the moment of minting. The procurement spread is the difference between the issuer's actual acquisition cost for the underlying and the benchmark that the token's reference price is struck against. Different party, different moment, different economics.
An issuer buying gold in institutional size can source inside the spread a retail benchmark implies. An issuer buying short government paper can work the gap between a secondary market price and its NAV equivalent yield. An issuer originating credit captures the distance between the borrower's coupon and the yield passed through to holders. In all three the mechanism is identical: acquire below the reference, issue at the reference, keep the difference.
What Paxos discloses about PAX Gold, and what it does not
Paxos is unusually specific in its published terms, and reading them shows how much of this sits outside the fee schedule. Storage fees are not charged in cash. Paxos states it "may charge storage fees to all token holders by issuing to Paxos new PAXG tokens, thereby diluting the value of existing PAXG tokens," passed on pro rata.1 The cost reaches the holder as dilution rather than as a line on an invoice.
The same document reserves a second lever: PAXG "may be sold at a discount to certain Customers for market making purposes," with incentives available to certain market participants.1 That is a disclosed, explicit acknowledgement that issuance price varies from the reference by counterparty. Note what is absent. No numeric storage fee rate appears in that document, so the mechanism is public and the magnitude is not.
The round trip is the number a holder actually pays
For a physically backed token the full cost stack has more legs than the headline. Tether Gold's structure ties each token to a troy ounce of a specific London Good Delivery bar held with a Swiss custodian, and carries creation and redemption fee schedules alongside logistics and insurance costs for physical delivery.2
Add them up in the order a holder would encounter them. Creation fee in. Any carrying or storage cost while held, whether charged in cash or through dilution. Redemption fee out. Delivery logistics if the redemption is physical. And the gap between the reference benchmark and where the token actually trades. Compare that total against simply owning the underlying, because that is the comparison the product is asking a buyer to make.
Tokenisation compressed trading spreads and left issuance alone
The Bank for International Settlements looked at this split directly for government bonds. Tokenised bonds showed a mean bid ask spread of roughly 19 basis points against roughly 30 for comparable conventional bonds, while issuance costs, which BIS defines as the gap between the price paid by the public and the price the underwriter pays the issuer, showed no systematic reduction from tokenisation.3
That is the procurement spread finding in one line, from a central bank, on a different asset class. Moving an instrument onto a ledger squeezed the cost of trading it. It did not squeeze the margin taken at the point of origination, because that margin comes from relationships, balance sheet and access rather than from settlement friction. An issuer citing tighter secondary spreads as evidence their whole cost stack fell is answering a question nobody asked.
Publish it as a line item
In our view the procurement spread belongs in the fee table next to the creation fee, the management fee and any market making arrangement, expressed as a range with the sourcing method behind it. Blending it into a NAV methodology is not simplification. It moves a real cost somewhere the holder cannot price it.
Whether non disclosure creates a legal exposure depends on how the instrument is classified and where it is offered, and that is a call for counsel rather than a design document. The commercial case stands on its own regardless. An issuer who can state their procurement spread and defend it has a revenue model they understand. An issuer who cannot has one that only works while nobody asks.
Common questions
What is a procurement spread in a tokenized asset?
It is the margin an issuer earns between its actual cost of sourcing the underlying asset and the benchmark price used to set the token's reference value. It is captured before the holder transacts, which makes it structurally separate from the creation fee. An issuer can advertise a zero creation fee and still run a profitable issuance business entirely on this spread.
Do token issuers have to disclose procurement spread?
That depends on how the instrument is classified and which jurisdiction it is offered in, so it is a question for the issuer's counsel rather than a general rule. What is observable is that disclosure practice varies widely. Paxos publishes the mechanism by which storage fees dilute PAXG holders without publishing a rate for it, which is more than many issuers disclose and still less than a holder needs.1
How do I work out the real cost of holding a commodity backed token?
Add the round trip rather than reading the headline. Creation fee in, any storage or carrying cost while held including costs charged through dilution, redemption fee out, delivery logistics and insurance if redemption is physical, and the gap between the benchmark and the traded price.12 Then compare that total against holding the underlying directly, which is the comparison the product is implicitly making.
See RWA Tokenomics Design for how this applies in practice.
Sources
- PAX Gold Terms and Conditions
Paxos Trust Company, 2025
Issuer documentation stating that storage fees are charged by minting new PAXG to Paxos, diluting existing holders pro rata, and that PAXG may be sold at a discount to certain customers for market making purposes. No numeric rate is disclosed in the document. - Tether Gold (XAUT) product page and FAQ
Tether Operations Limited, current
Product structure tying each token to a troy ounce of a specific London Good Delivery bar with a licensed Swiss custodian, plus the creation and redemption fee schedules and physical delivery logistics that make up a round trip cost. - Tokenisation of government bonds: assessment and roadmap (BIS Bulletin No. 107)
Bank for International Settlements, 2024
Mean bid ask spread of roughly 19 basis points for tokenised bonds against roughly 30 for conventional, with no systematic reduction in issuance costs, defined as the gap between the price paid by the public and the price the underwriter pays the issuer.
Last reviewed 2026-08
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