Tokenizing commodities: opportunities, risks and compliance requirements

In the process of digitizing the supply chain, physical goods are being considered by many organizations as a suitable object to “Tokenize” (represent in the form of digital certificates). In Vietnam, the strengths in gold, coffee, pepper, cashews, seafood, rubber, etc. open up the possibility of researching more transparent models of quantification, inspection and traceability. 

Why are goods suitable for the “Tokenize” move?

In the early stages of the digital asset market, commodities are often considered to be easily accessible due to a number of favorable characteristics: clearly quantifiable (weight, specifications), having a quality standard framework, having an international reference price list and a long history of circulation. The ability to store, inspect and physically compare also makes the construction of a backup/guarantee mechanism more operationally feasible.

In the context of Vietnam's strengths in gold, coffee, pepper, cashews, seafood, rubber, etc., the survey of commodity "Tokenization" models, if implemented correctly and within the legal scope, can support process transparency, optimize supply chain operations and expand market access for participating entities.

Operational principles & compliance should be given priority

When it comes to “Tokenizing” commodities, the key point is not only the technology but also how to control risks regarding:

• Quantification & Pricing: weight, quality grade, reference price source and update mechanism to help represent numeric values maybe more transparent.
  
• Storage & Inspection: standard warehouse (e.g. ISO/HACCP), independent inspection process, traceability records to help guarantee maybe reliable.
  
• Reconciliation & provision disclosure: The model for transparent disclosure of the quantity of goods guaranteed (Proof-of-Reserve) needs to be carefully designed, linked with periodic auditing/control.
  
• Technical infrastructure: data oracle, inventory history recording, goods status change log... need to meet safety, availability and anti-interference requirements.
  
• Legal compliance: all implementation steps should reference applicable regulations and/or sandboxes where available;.

Reference case: for gold

RWA-oriented businesses may ask about tokenizing gold. Gold has the characteristics of being standardized, having an international reference market, and being easy to store. From a modeling perspective, the general operating process can be visualized as follows:

1. Physical gold is inspected and stored according to standards announced by the depository unit.
2. Based on the inspection and inventory records, a representative “tokenize” is formed according to the reference ratio (e.g. 1:1).
3. Any transfer/exchange between “digital certificates” and physical gold — if any — should clearly describe the conditions, procedures and limitations.
4. Independent audit and guarantee information may be published periodically.

However, gold is a more special asset than other common assets. Therefore, it is necessary to pay attention to complying with the relevant legal framework (when there are specific regulations) and attach importance to the R&D process and risk control before considering actual operation.

Case study: coffee and the story of supply chain standardization

Vietnam is a leader in Robusta, but the supply chain is fragmented, prices are volatile, and access to capital is difficult. At the model level, “Tokenize” coffee maybe support:

• Batch standardization (moisture, classification, grade, weight) associated with traceability codes.
• Form “tokenize” representing small units (e.g. 1 kg), facilitating transactions/exchanges within the allowed range.
• Support for stakeholders (farmers, warehouses, processing/exporting enterprises) maybe Optimize cash flow and inventory management, subject to regulations.

CoffeFi is intended as a research project on digitalizing coffee shipment representation and connecting data between producers – warehouses – businesses. Any extended financial functions (e.g. using digital certificates for loans, rewards…), if any, will only be considered within a suitable testing framework and with approval from the competent authority.

Potential benefits and material risks

Potential benefits

• Operating liquidity: Commodity flows can be exchanged more flexibly according to actual demand, instead of depending entirely on seasonal/contractual cycles.
• Quality transparency: Each shipment is equipped with inspection records, storage history and traceability codes, helping to reduce fraud.
• Market connection: unified data standard maybe help Vietnamese businesses access international partners more conveniently.

Key risks

• Legal & Classification: adhere to the legal framework to choose the appropriate approach, avoiding implementation outside the scope of testing or licensing.
• Warehouse operations & escrow: difference between reported and actual inventory, inspection error, storage risk.
• Data & Oracle: update errors, data manipulation, or single source dependence.

Conclusion

“Tokenizing” commodities, when approached properly and within the right framework, can become a way to improve supply chain operational efficiency, strengthen quality transparency and open up more flexible ways of connecting markets. HVA chooses a compliance-transparency-prudence approach, focusing on operations and risk management, and only considers financial features as research content until appropriate legal guidance is available.

This series of articles is for sharing knowledge and information, not for investment recommendations or financial product offerings, not for legal analysis or predictions, but focuses on sharing about technology, economics, and investment. The contents referring to regulations, if any, will be written based on existing legal principles, the parts without detailed regulations will be explained and mentioned based on experience in countries that have implemented them in practice. Readers need to proactively read and understand the current policies and legal framework of Vietnam through official documents; at the same time, need to comply with the current legal framework and only operate when specifically licensed, cautiously and responsibly towards the State, community, and society.