What is PAX Gold (PAXG): An ERC-20 Token Pegged to Physical Gold

PAX Gold (PAXG): The Integration of Gold Assets and Blockchain Technology

PAX Gold (PAXG) is an ERC-20 token issued by the U.S. fintech company Paxos Trust Company. Each token represents one troy ounce of a London Good Delivery gold bar, with the physical gold stored in Brink’s vaults and regularly verified by third-party auditors. Since its launch in 2019, PAXG has enabled digital ownership of gold via blockchain, addressing traditional gold investment’s barriers such as high entry thresholds, poor liquidity, and storage costs. As of May 2025, PAXG’s market capitalization has reached $791 million, making it a leading asset in the tokenized gold sector.

PAX Gold’s core strength lies in its compliance and transparency. As the first gold-pegged token approved by the New York State Department of Financial Services (NYDFS), Paxos publishes monthly audit reports, disclosing the 1:1 ratio between gold reserves and token supply. Smart contracts enable instant redemption between tokens and gold. Users can query their PAXG token’s corresponding gold bar number and physical characteristics via their Ethereum address, greatly enhancing trust.

Coinbase Lists PAXG: Expanding the Market for Regulated Assets

On May 8, 2025, Coinbase announced the official listing of the PAXG-USD trading pair, supporting ERC-20 network transfers. This move is seen as a major signal that the crypto market is embracing regulated assets. As the largest regulated exchange in the U.S., Coinbase’s listing of PAXG not only increases the token’s liquidity but also provides a convenient entry point for traditional investors to allocate gold via crypto channels.

The rationale behind PAX Gold’s Coinbase listing is closely tied to its underlying asset characteristics:

• Inflation hedge: Amid increasing USD volatility, PAXG’s peg to gold makes it a preferred safe-haven asset.

• Regulatory endorsement: Regulated by NYDFS and compliant with the U.S. Bank Secrecy Act and anti-money laundering regulations, PAXG aligns with Coinbase’s compliance strategy.

• DeFi compatibility: PAXG is integrated into protocols like Aave and Uniswap, allowing users to earn yield through staking or liquidity mining, further extending gold’s on-chain utility.

Tokenized Gold: A Bridge Between Traditional Finance and the Crypto Ecosystem

PAXG’s success reflects a long-term trend toward tokenized gold. According to research, amid central banks’ increased gold holdings and growing blockchain adoption, tokenized gold is emerging as a new paradigm of “on-chain hard currency.” Its core value lies in:

• Liquidity revolution: Traditional gold trading relies on centralized institutions like LBMA, while PAXG enables cross-border instant settlement via smart contracts with transaction fees as low as $0.50, increasing trading efficiency by 40x.
• Composable innovation: PAXG can be used as collateral for on-chain lending (e.g., via Compound) or synthetic asset issuance, unlocking gold’s financial derivative value.
• Inclusive investing: A minimum investment of 0.01 PAXG (around $15) allows retail investors to participate in the gold market, breaking the high capital barriers of traditional gold bars.

Challenges and Future Outlook

Despite its advantages in compliance and technology, PAXG faces multiple challenges:

• Regulatory divergence: Policies on gold tokenization vary by country. For example, the EU’s MiCA regulation requires strict reserve disclosure, potentially raising operational costs.

• Market competition: Competitors like Tether Gold (XAUT) have already taken part of the market share; PAXG must reinforce its edge through lower fees or cross-chain compatibility (e.g., integration with the Bitcoin ecosystem).

• Technical bottlenecks: Ethereum’s gas fees and transaction speeds limit PAXG’s scalability; future expansion to high-performance chains like Solana may be necessary.

PAX Gold’s next development phase may focus on integrating AI with gold. For instance, using zero-knowledge proofs (ZKP) to verify gold supply chain data or developing on-chain gold derivatives trading protocols. Users can incorporate PAXG into diversified portfolios via JuCoin’s stablecoin wealth management service to balance risk and return.