What is Redemption Gate?
A redemption gate is any limit on converting a token back into the underlying: a queue, a notice period, a daily cap, a minimum size, an eligibility restriction, or a full suspension. Gates exist to protect a fund from a run, and they are the most common reason a token drifts into a persistent discount.
Also called: redemption gate · paused redemptions · redemption queue · gating · redemption window
How a gate becomes a discount
Redemption is the arbitrage that pulls a token back toward NAV. Slow it — a multi-day window, a six-figure minimum, an authorised-participant-only door — and the arbitrage costs more, so the price can settle below NAV by roughly the cost and risk of getting through the gate. Close it entirely and the anchor is gone: the token trades on sentiment and secondary liquidity alone until the door reopens.
What to check before trusting a peg
Read the redemption terms the way you would read a fund prospectus: who may redeem, in what size, on what schedule, and with what discretion to suspend. A tight peg held by an open, cheap redemption path is structurally different from a tight peg held by market makers while the gate is shut. The two look identical on a price chart and behave nothing alike under stress.
Frequently asked questions
Why does a tokenized asset trade at a discount to NAV?
Usually because the path back to the underlying is slow, costly, restricted or paused. When redemption is easy the discount is arbitraged away; when it is gated the discount persists.
Can an issuer suspend redemptions?
Most issuer terms reserve the right to limit or suspend redemptions in stressed conditions. Whether and how they may do so is set out in each product's own documentation.
Where this shows up live
On the desk
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Related terms
- Mint & Redeem — Mint and redeem is the primary-market mechanism that keeps a backed tokenized asset aligned with its underlying.
- Primary vs Secondary Market — The primary market is where tokens are created and destroyed against the underlying — authorised parties mint on deposit and redeem for delivery, transacting at NAV under the issuer's terms.
- De-Peg & Tracking Error — A de-peg (or tracking error) is when a tokenized asset's price drifts away from the value of the share or fund it represents.
More in Pricing
De-Peg & Tracking Error · Mint & Redeem · Multi-Oracle Pricing · NAV Premium & Discount · Net Asset Value (NAV) · Oracle Divergence
Informational only · not financial advice. See the live numbers on the data desk, the sourcing rules in the methodology, or the day's stories in the newsroom. · ← All glossary terms