Commodity Tokenization in Saudi Capital Markets: Gold, Oil Derivatives, and Agricultural Tokens

SAR 400 million in commodity-backed token products are currently under testing in the CMA sandbox, making commodity tokenization the next major asset class frontier for Saudi Arabia’s digital securities market. The CMA has announced plans to publish dedicated commodity tokenization rules in Q3 2026, building on 18 months of sandbox testing to address gold-backed tokens, oil derivative instruments, and agricultural commodity tokens. Saudi Arabia’s position as the world’s largest oil exporter, combined with estimated gold imports of $6.5 billion annually and a significant domestic mining sector expansion under the SAMI initiative, creates natural and diversified demand for commodity tokenization infrastructure across multiple asset categories.

Current Regulatory Status

Commodity tokenization in Saudi Arabia currently operates under the general CMA Digital Assets Regulatory Framework, which classifies commodity-backed tokens as Digital Asset Securities when they carry investment characteristics. The CMA has indicated that dedicated commodity tokenization rules will address:

Physical Delivery Requirements: Sharia compliance for commodity tokens requires the possibility of physical delivery or constructive possession. Purely synthetic commodity exposure through tokenization does not meet current Sharia standards. The rules will specify when physical delivery must be available and when constructive possession (documented ownership without physical transfer) is sufficient.

Storage and Verification: Standards for physical commodity storage, independent verification, and the relationship between physical reserves and outstanding tokens. Gold-backed tokens, for example, will require LBMA-good delivery bar storage at approved Saudi vaults, with quarterly physical audits.

Valuation Standards: Methodology for valuing commodity-backed tokens, including reference price sources, valuation frequency, and treatment of contango/backwardation in forward commodity markets.

Commodity Classification: The CMA distinguishes between three categories of commodity tokens: (1) asset-backed tokens representing direct ownership of physical commodities, (2) fund-structure tokens providing indirect commodity exposure through managed portfolios, and (3) derivative-linked tokens providing synthetic commodity exposure. Categories 1 and 2 are currently eligible for sandbox testing; category 3 requires additional regulatory framework development due to Sharia concerns about synthetic derivative exposure.

Insurance Requirements: Commodity token issuers must maintain insurance coverage for physical commodity loss, theft, or damage. The CMA’s custody standards require minimum coverage equal to 110% of outstanding token value for gold-backed tokens and 100% for other commodities. Insurance must be provided by a SAMA-licensed insurer with minimum A-rated financial strength.

Environmental Compliance: Commodity tokenization must comply with Saudi Arabia’s Environmental Sustainability Framework. Oil-linked tokens must include carbon intensity disclosures per IOSCO sustainability standards. Agricultural tokens must demonstrate compliance with Saudi food safety regulations and water usage sustainability standards under Vision 2030.

Sandbox Testing

Three entities are testing commodity token products in the CMA sandbox:

Gold-Backed Token (SAR 250M target):

• Structure: Each token represents ownership of 1 gram of LBMA-good delivery gold stored in a Saudi vault
• Technology: ERC-3643 on permissioned Ethereum
• Target investors: Retail and institutional (minimum SAR 500 per token, approximately the price of 1 gram of gold)
• Sharia status: Pre-certified as Sharia-compliant by a CMA-approved board
• Unique value: First Sharia-compliant, CMA-regulated gold token — competing with unregulated international gold tokens

Oil Derivative Token (SAR 100M target):

• Structure: Tokenized participation in a Sharia-compliant oil commodity murabaha fund
• Technology: Hyperledger Fabric
• Target investors: Qualified investors only
• Sharia status: Under review (oil derivative structures require careful Sharia structuring to avoid gharar)

Agricultural Commodity Token (SAR 50M target):

• Structure: Tokenized salam (forward purchase) contracts for Saudi date production
• Technology: R3 Corda (compatible with Tadawul infrastructure)
• Target investors: Semi-qualified and retail
• Sharia status: Salam contracts are a classical Islamic finance structure; certification expected

Market Opportunity

Saudi Arabia’s commodity tokenization market opportunity is driven by the Kingdom’s unique position as both the world’s largest oil exporter and a major gold market, combined with Vision 2030’s agricultural modernization ambitions:

Gold Market: Saudi Arabia imported approximately $6.5 billion in gold in 2025, and the Kingdom’s gold reserves and the cultural significance of gold create strong retail demand for gold-backed investment products. The current gold investment market is primarily physical (gold souks in Riyadh, Jeddah, and Dammam collectively handling an estimated SAR 15 billion in annual transactions) or through conventional gold ETFs and gold accumulation plans listed on Tadawul. Tokenized gold offers fractional ownership (as low as 0.1 grams), instant atomic settlement, and Sharia certification advantages that no existing product combines. The CMA’s investor protection framework ensures that tokenized gold products meet institutional-grade regulatory standards while remaining accessible to retail investors.

Oil Exposure: While Saudi Arabia exports approximately 7.5 million barrels per day and holds the world’s second-largest proven reserves, Saudi investors have limited regulated options for oil price exposure within the Kingdom’s domestic market. International oil ETFs and futures are accessible only through cross-border brokerage arrangements. Commodity tokenization could provide regulated, Sharia-compliant oil exposure through Tadawul’s digital platform, structured as murabaha-based instruments that avoid the gharar (excessive uncertainty) concerns associated with conventional futures contracts. SAMA has indicated preliminary support for oil-linked tokens provided they comply with payment token regulations and do not function as synthetic derivatives.

Agricultural Innovation: Saudi Arabia’s food security initiatives under Vision 2030 include SAR 30 billion in planned agricultural investment through 2030. Tokenized salam contracts could provide forward financing for agricultural production — dates, wheat, poultry, dairy — while giving investors exposure to this growing sector. The Saudi Agricultural Development Fund has expressed interest in tokenized salam as a mechanism for channeling private capital to agricultural producers, potentially reducing the government’s direct subsidy burden.

Mining Sector: Saudi Arabia’s nascent mining sector, projected to reach SAR 80 billion in GDP contribution by 2030 under the Saudi Mining Investment initiative (SAMI), presents additional commodity tokenization opportunities. Gold, copper, phosphate, and rare earth minerals from Saudi mines could be tokenized at the point of extraction, creating Saudi-origin commodity tokens with full supply chain provenance tracked on the blockchain.

International Benchmarking: Commodity tokenization positions Saudi Arabia alongside Singapore and Switzerland as leading jurisdictions for regulated commodity-backed digital assets. The CMA’s regulatory framework provides clearer classification criteria for commodity tokens than most competing jurisdictions, potentially attracting international commodity trading firms seeking compliant tokenization infrastructure. The CMA’s international cooperation framework includes provisions for mutual recognition of commodity token listings with partner jurisdictions.

Physical Storage and Verification Infrastructure

A critical element of commodity tokenization that distinguishes it from securities tokenization is the requirement for physical asset custody and verification:

Gold Storage: The CMA’s forthcoming rules will require gold-backed tokens to be supported by LBMA-good delivery bars stored in Saudi-based vaults certified by the CMA and SAMA. Currently, three vault facilities in Riyadh and Jeddah meet the preliminary requirements. Each vault must maintain 24/7 security monitoring, biometric access controls, and real-time weight verification systems integrated with the token smart contract.

Verification Protocols: Independent quarterly physical audits by CMA-approved auditors will verify that the gold reserves match outstanding token supply. Audit reports will be published on-chain, accessible to all token holders. Any discrepancy triggers an automatic trading halt on Tadawul’s platform until resolution, protecting investors from fractional reserve risks.

Oil Commodity Documentation: For oil derivative tokens, physical delivery is not practical for retail investors. The Sharia board has proposed a constructive possession framework where the token issuer maintains documented ownership of oil through warehouse receipts from certified storage facilities in Ras Tanura, Yanbu, or international locations with Saudi Aramco trading arm verification.

Agricultural Product Standards: Salam tokens require documentation of the forward purchase contract, crop insurance, and quality grade specifications. The Saudi Grains Organization (SAGO) has agreed to serve as the quality verification authority for date and grain salam tokens, providing harvest-time grading reports that are recorded on-chain.

Integration with Capital Markets Infrastructure

Commodity tokens will integrate with existing Saudi capital markets infrastructure through a comprehensive technical and regulatory framework:

• Tadawul listing: Commodity tokens meeting CMA and Tadawul listing requirements will be tradable on the digital securities platform, with dedicated commodity token trading sessions
• Edaa custody: Central depository services for commodity-backed tokens, with integration to physical storage verification systems and automated reconciliation
• Blockchain settlement: T+0 atomic settlement for commodity token trading, with the R3 Corda infrastructure extended to handle physical delivery triggers
• Investor protection: Full CMA investor protection framework applies to commodity tokens classified as Digital Asset Securities, including the three-tier investor classification and the Investor Protection Fund
• AML/CFT compliance: Commodity tokens are subject to the same anti-money laundering requirements as other digital securities, with enhanced due diligence for large physical delivery requests
• Market making: Designated market makers will be required for listed commodity tokens, with obligations adapted for commodity-specific price dynamics

Pricing and Valuation Framework

The CMA’s commodity token valuation framework addresses unique pricing challenges:

Reference Price Sources: Gold tokens will be priced against the LBMA Gold Price (AM and PM fixes) with intraday pricing from the Tadawul continuous auction mechanism. Oil tokens will reference Brent crude and Arab Light crude benchmarks. Agricultural salam tokens will reference SAGO posted prices for domestic commodities.

Contango and Backwardation: For commodity tokens with forward delivery features, the smart contract must account for the term structure of commodity prices. The CMA requires disclosure of the methodology for rolling forward contracts and the impact of contango (forward prices above spot) or backwardation (forward prices below spot) on token valuation.

Currency Risk: Commodity tokens denominated in SAR but referencing USD-denominated commodities (gold at LBMA, oil at Brent) carry implicit SAR/USD currency risk. Given the SAR’s peg to the USD at 3.75, this risk is minimal but must be disclosed per CMA disclosure requirements.

Projections and Roadmap

The CMA’s commodity tokenization roadmap:

• Q3 2026: Dedicated commodity tokenization rules published
• Q4 2026: First gold-backed token graduates from sandbox to full CMA license
• Q1 2027: First commodity token listed on Tadawul digital platform
• 2027: Target SAR 1 billion in commodity tokens outstanding
• 2028: Target SAR 3-5 billion, including oil derivative and agricultural tokens
• 2030: Target SAR 10 billion in commodity tokens, establishing Saudi Arabia as the global hub for Sharia-compliant commodity tokenization

Competitive Landscape and International Context

Saudi Arabia’s commodity tokenization ambitions operate within a competitive international landscape:

Switzerland: The Swiss Financial Market Supervisory Authority (FINMA) has approved several gold-backed tokens, including PAX Gold and Tether Gold. However, these products operate under lighter regulatory frameworks than Saudi Arabia’s proposed regime, and none carries Sharia certification — giving Saudi gold tokens a distinct advantage in the $3.6 trillion global Islamic finance market.

Singapore: The Monetary Authority of Singapore has authorized commodity token trading through licensed exchanges, with particular focus on carbon credit tokenization. Saudi Arabia’s agricultural token focus (date salam contracts) provides differentiation from Singapore’s carbon market approach.

UAE: The UAE’s VARA framework permits commodity token trading but has not published dedicated commodity tokenization rules. Saudi Arabia’s forthcoming dedicated commodity framework will provide clearer regulatory certainty than the UAE’s general digital asset classification approach.

Global Market Size: The total addressable market for tokenized commodities is estimated at $1.5-2.5 trillion globally by 2030, encompassing gold, oil, agricultural products, carbon credits, and industrial metals. Saudi Arabia’s natural commodity endowment and regulatory ambition position the Kingdom to capture a significant share of this market, particularly in Sharia-compliant commodity tokens where no competing jurisdiction has established regulatory infrastructure.

The CMA’s approach to commodity tokenization demonstrates the same methodical, sandbox-first strategy that has characterized the broader Saudi tokenization framework. By publishing dedicated rules before allowing production issuance, the CMA provides the regulatory certainty that institutional issuers and investors require while maintaining the flexibility to adapt as the commodity token market evolves.

Saudi Arabia’s FATF membership, secured in 2019, strengthens the compliance infrastructure underpinning commodity tokenization. The FATF’s beneficial ownership standards ensure that commodity token holders are subject to robust identification requirements, preventing the use of tokenized commodities for money laundering or sanctions evasion. The CMA’s AML/CFT framework requires all commodity token issuers to implement real-time blockchain analytics and enhanced due diligence for high-value physical delivery requests, addressing the specific financial crime risks associated with commodity-backed digital assets. This compliance architecture positions Saudi commodity tokens as institutional-grade instruments suitable for the Kingdom’s regulated capital markets infrastructure.

For commodity tokenization inquiries: info@sauditokenisation.com