Crypto Gloss

PAX Gold (PAXG)

Definition:

PAX Gold (PAXG) is a regulated, ERC-20 tokenized gold token issued by Paxos Trust Company — holding a trust charter from the New York Department of Financial Services (NYDFS) — where each PAXG token represents a fractional or full ownership claim on a 400-troy-ounce London Good Delivery gold bar held in professional Brinks vaults in London or New York, insured against theft and institutional failure, with holders able to verify their specific allocated gold bar via an on-chain lookup and redeem for physical delivery or cash at Paxos’s spot gold price. PAXG is one of the two dominant tokenized gold tokens by market capitalization alongside Tether Gold (XAUt).

How PAXG Works

Backing and custody:

  • 1 PAXG = 1 troy fine ounce of physical gold
  • Gold held in Brinks professional vaults (London and New York)
  • Each PAXG holder can identify their allocated gold bar by querying the Ethereum smart contract: calling the getDecimalsFromGoldBar() function or using Paxos’s token lookup tool returns the specific bar’s serial number, weight, and fineness
  • Gold bars are fully allocated (not commingled)

Insurance:

  • PAXG gold is insured by Paxos’s institutional insurance policy
  • If Paxos fails as a company, the trust structure means the gold assets are segregated and returned to token holders — not available to Paxos creditors

Regulatory standing:

  • Paxos Trust Company holds a New York trust charter — the same license that backs PYUSD and formerly BUSD
  • NYDFS conducts regular examinations of Paxos’s reserves and operations
  • This is a meaningful distinction from XAUt (Tether Gold), which has no equivalent regulatory oversight

Fees

Paxos charges:

  • No custody fee (unlike physical gold ETFs that charge an annual expense ratio)
  • 0.02% creation fee (on new PAXG minted directly from Paxos)
  • 0.02% redemption fee (on PAXG converted back to cash or physical gold)
  • No ongoing annual fee — Paxos earns via bid/ask spread and deployment of float

This fee structure is more attractive than gold ETFs (e.g., SPDR GLD charges 0.40% per year).

Redemption Options

PAXG holders can redeem through Paxos directly:

  1. LBMA gold bars: Minimum 430 PAXG (approximately 1 standard 400-oz bar); delivery arranged to a vault of your choice
  2. Unallocated gold: Sell into the gold market via Paxos broker network
  3. USD: Redeem for cash at spot gold price minus the 0.02% fee

Retail investors typically exit via secondary market (sell on Gemini, Kraken, or DeFi).

DeFi Integration

PAXG is accepted as collateral across DeFi:

  • Aave: PAXG can be deposited as collateral to borrow stablecoins
  • Uniswap: PAXG/ETH and PAXG/USDC liquidity pools provide secondary market
  • Curve Finance: PAXG liquidity pools
  • MakerDAO: PAXG has been proposed (and at times approved) as a Vault collateral type for minting DAI

This DeFi composability is a key advantage over holding physical gold or gold ETF shares.

PAXG vs. XAUt

Feature PAXG XAUt (Tether Gold)
Issuer Paxos Trust Co. TG Commodities (Tether)
Regulatory oversight NYDFS trust charter Minimal
Vault location London/New York (Brinks) Switzerland (undisclosed)
Insurance Yes (institutional) Yes
Minimum minting 0.01 PAXG (~$50) 50 XAUt (~$250K)
Blockchain Ethereum Ethereum, TRON
Redemption threshold 430 PAXG for bar 430 XAUt for bar
Annual fee None None

Social Media Sentiment

PAXG receives more favorable sentiment than XAUt in the DeFi community because of Paxos’s regulatory track record. Traditional finance and crypto crossover investors view PAXG as the “safer” tokenized gold option. Gold price movements drive PAXG discussion more than crypto-native narratives. When gold rallies (e.g., during geopolitical risk events), PAXG tends to trend in crypto finance circles as an on-chain gold hedge.

Last updated: 2026-04

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