KETJU Research

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tokenized-commodity

Kinesis gold and silver (KAU, KAG)

Adverse research finding
Research assessment
adverse
Firm shelf
excluded by policy
Model-client eligibility
not assessed
Selection
not considered
Action and amount
Not set by research
Reviewed
2026-09-23 · v1
Next review
2026-12-23
Research basis
Individual research
Chains
Ethereum · sovereign
Symbols
KAU KAG
Eligibility file
What the holder owns and who may hold it

Research, firm shelf, model-client eligibility, and advisor selection are recorded separately. The scheduled date is the outside bound; new evidence can reopen the file sooner.

One KAU is meant to be one gram of gold and one KAG one troy ounce of silver. Two companies issue tokens under those names, and they are not the same asset. Kinesis Cayman, a Cayman Islands company, issues native KAU and KAG on its own blockchain, a fork of Stellar. Its terms say the holder keeps legal title to allocated bullion that Kinesis holds as bailee, stored through Allocated Bullion Exchange (ABX) in thirteen vault locations. KMS Labs S.A., a Panama company, issues ERC-20 KAU and KAG on Ethereum against native tokens it holds. Its terms say the ERC-20 holder has “no legal, equitable or beneficial right, title or interest in or to the Reserves.” On 2026-09-23 the KMS Labs reserve account held 1,640,000 KAU, equal to about 64% of the 2,565,133 KAU in circulation at the April 2026 audit. Most of what trades as KAU is now the Panama company’s token, not the bailment. The adverse assessment rests on three facts. First, the custodian is not independent of the issuer: Thomas Coughlin signs the June 2026 audit letters both as CEO of Kinesis Money and as CEO of ABX, and two of the vault locations are Kinesis’s own. The only physical check is a Bureau Veritas inspection that ABX commissions twice a year, weighing a sample of a little over 5% of the metal. Second, the ERC-20 tokens give the holder a promise, not property: redemption into native tokens is at KMS Labs’ “sole discretion,” no independent check of its reserve has been published, and single keys on Ethereum can mint, pause, deny-list any address, and grant themselves the power to move a listed balance or replace the code. Third, the “yield” Kinesis advertises is a rebate of transaction fees: 0.50% over the last twelve months on gold and 0.05% on silver, revocable at any time, and not paid on ERC-20 tokens at all. A client who wants gold or silver is better served by a physically backed ETF held at an independent custodian.

The research file

Two issuers, two claims

Native KAU and KAG exist only on the Kinesis blockchain. Kinesis Cayman’s Terms of Use (effective May 28th 2026) define “Allocated” as bullion “to which a natural or legal person has legal title, with Kinesis holding it on that person’s behalf as bailee,” and say legal and beneficial title stays with the holder until the tokens move to another address. The same schedule also says each holder has “an undivided interest in the total pool of Bullion” in proportion to holdings, so the holder owns a share of a pool, not a numbered bar. Kinesis says the metal never appears on its or ABX’s balance sheet.

The ERC-20 tokens are a different contract with a different company. KMS Labs S.A. (Panama, company number 155772003) mints them at 0x14DAB79f…EA52 (KAU) and 0x56Ba8B58…1B8e (KAG) and holds native tokens in a reserve account on the Kinesis blockchain, GAJ6XIVD…6ERC, which needs two of four signers to move funds. On 2026-09-23 that account held 1,640,000.099 KAU and 35,000.099 KAG against 1,640,000 ERC-20 KAU and 35,000 ERC-20 KAG. KMS Labs’ terms say the holder owns no part of that reserve, that KMS Labs keeps whatever the reserve earns, and that “the issuer of the Kinesis Tokens that make up the Reserve is not the issuer of the Tokens and has no obligations to holders of the Tokens.” The KMS Labs site puts it plainly: “ERC-20 KAU/KAG holder’s counterparty is KMS Labs, not Kinesis.” The terms also define the reserve tokens by two addresses on the public Stellar network, KAU-GA3X…R44HXE and KAG-GDN6…H3HXH5, rather than on the Kinesis blockchain; on 2026-09-23 each of those Stellar assets had 100 units outstanding across three or four accounts. The document that governs a token worth about $225 million names the wrong reserve.

Vaults, custodian, and the audit

Kinesis stores the metal through ABX, an Australian company (ACN 149 681 489) at the same Brisbane address as Kinesis Australia. The April 2026 audit pack has three letters. Bureau Veritas Commodities UK, engaged by ABX, inspected the gold and silver held for Kinesis Cayman at Brinks, Malca Amit, Loomis, Atlas, and OZL sites and at “Kinesis Batam Indonesia” and “Kinesis Istanbul,” weighed “a sample of over 5.0% of the total weight,” found no non-conformities, and said the vault reports, ABX’s system, and the holdings reconcile. ABX’s letter and Kinesis’s letter, both dated 3 June 2026, are signed by the same person, Thomas Coughlin, once as CEO of ABX and once as CEO of Kinesis Money. The Kinesis letter counts 2,565,133.465 KAU against 2,567,133.466 grams of gold and 3,683,448.057 KAG against 3,688,827.985 ounces of silver on 20 April 2026, the surplus being a reserve of two 1 kg gold bars and five silver bars.

This is an inspection on agreed procedures, not an attestation to a reasonable-assurance standard, and the party that hires the inspector runs the vault network and shares a chief executive with the issuer. A bailment protects the holder if Kinesis fails only if the bailee’s records show which metal is whose; here the bailee and the record keeper answer to the same management. The audits also cover native tokens only: KMS Labs says independent verification of the ERC-20 reserve “will be disclosed separately.”

How the yield works

Every transfer on the Kinesis blockchain pays 0.45% of its value, capped at 25,000 KAU or KAG, and trades on the Kinesis Exchange pay 0.22%. Those fees go into a Master Fee Pool that Kinesis pays out monthly in metal. Holders who pass onboarding share 15% of it in proportion to their daily balances; users who trade or spend KAU and KAG share 10% as the “Velocity Yield”; minters, referrers, KVT holders, and partners take other shares, and Kinesis says it returns over half of all transaction fees this way. Kinesis’s holder page on 2026-09-23 showed a twelve-month holder yield of 0.50% on gold and 0.05% on silver, and a July 2026 gold payout of $155,316. The yield is a rebate paid for by other users’ transfer fees, so it falls when activity falls. Schedule 6 lets Kinesis “amend, suspend or terminate any Yield offering to You individually at any time,” for reasons including citizenship or residence, and says accrued yields “shall no longer be payable.” Section 6.2.2 excludes ERC-20 tokens: Holder Yield is paid “only on Kinesis-native KAU/KAG.” The ERC-20 holder pays the price of the reserve and gets none of its income, which KMS Labs keeps.

Who controls each chain

On the Kinesis blockchain KAU and KAG are each a network’s native asset, as lumens are on Stellar. The Horizon servers for both networks (kau-mainnet and kag-mainnet at kinesisgroup.io) list no issued assets and no asset flags, so there is no freeze or clawback flag to set. New metal enters when Kinesis emits tokens from its emission account after a deposit, and redeemed tokens go back to the Kinesis root account and are destroyed. The network is Kinesis’s own fork; its terms describe consensus “among trusted accounts,” so the operator of the software is also the issuer. Kinesis says it never takes custody of tokens in a self-held Kinesis Wallet, but it may freeze or lock funds held in a Kinesis Exchange or Mint account and suspend access “for any reason.” This reading comes from the documents and the Horizon servers; the Ketju control reader does not yet read a native asset on a Stellar fork.

On Ethereum both tokens run the same Fireblocks ERC20F code behind upgradeable proxies. Every transfer checks an access registry, and on both tokens that registry is a Fireblocks DenyList (it lets an unlisted address through), so adding an address freezes it. recoverTokens then moves a listed address’s tokens to the caller. For KAU, one key (0xe584…a8ae) is the token’s default admin and contract admin and the deny list’s admin and upgrader; another single key (0x6eff…9138) can pause and edit the deny list; a third (0x4b1f…c8dd) mints. KAG has the same shape with 0x2494…b10f, 0x3e96…b493, and 0xe560…498e. No address held the token’s upgrader or recovery role on 2026-09-23, but the default admin can grant either in one transaction. KMS Labs’ terms let it freeze “at its sole discretion” without notice and seize frozen tokens.

Who may buy, hold, and redeem

Kinesis does not exclude US persons: it lists ACH purchases from the United States and offers its card to US residents, though card purchases of KAU and KAG are not available there. On the Kinesis Exchange the smallest order is 0.00001 KAU or KAG; minting new tokens takes at least 100 KAU or 200 KAG. KMS Labs lets any “Eligible User” hold the ERC-20 tokens, meaning anyone not sanctioned and not resident in its restricted list, which starts with Panama itself. Physical redemption runs through Kinesis only, in steps of 100 KAU (100 grams, about $13,700 at the 2026-09-23 price) or 200 KAG (200 ounces, about $12,900), for 0.45% of the order, a $100 fee, and postage, and each request is “managed on a case by case basis.” An ERC-20 holder must first persuade KMS Labs to redeem, on terms KMS Labs sets, then open a Kinesis account. KMS Labs “makes no representation or warranty that there will be direct redemption mechanisms available at all times.”

Comparison and decision

Against PAX Gold and Tether Gold, native KAU carries a stronger promise on paper, legal title under a bailment, but weaker proof: PAXG is attested monthly by KPMG against bars at LBMA vaults held by an OCC-supervised trust bank, while Kinesis relies on a sample inspection hired by a custodian that shares its CEO. ERC-20 KAU is weaker than either: the holder owns nothing, redemption is discretionary, and the reserve has no published check. Against a physically backed gold or silver ETF held at an independent custodian, with daily creation and redemption by authorized participants, Kinesis adds a related-party vault network, a private chain run by the issuer, a fee rebate sold as yield, and, for most of the KAU supply, a second company between the holder and the metal. The assessment reopens if the custodian becomes independent of Kinesis, if a reasonable-assurance attestation covers both the bullion and the KMS Labs reserve, or if KMS Labs grants ERC-20 holders a property right and a firm redemption path.

Sources

The claims above trace to these. Where a number could not be independently verified, the thesis says so.

Inherited controls

The research above describes the protocol layer. Every position also inherits the asset it holds and the chain it settles on. The most administered layer sets the position’s effective control grade; that is a control description, not a quality or suitability score.

ChainVerdictGradeControl constraint
EthereumFavorable sovereign No sequencer, no upgrade key, no operator who can be compelled — rule changes require social consensus.
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