What PAX Gold does
PAX Gold (PAXG) is a token issued by Paxos Trust Company where each unit represents ownership of one fine troy ounce of London Good Delivery gold, stored in Brink's vaults in London. Paxos, a New York-regulated trust company, holds the physical bars and PAXG holders hold a direct property claim on specific, serial-numbered bars — not a derivative or a promise, at least in principle.
Holders can redeem PAXG for physical gold delivery, though in practice this is only practical at meaningful size given delivery logistics and fees; smaller holders typically redeem for cash value instead or simply trade the token on exchanges as a liquid gold proxy. There's no ongoing storage fee for holding PAXG, unlike buying and vaulting physical bullion directly, though Paxos does charge on minting, redeeming and OTC trades above certain thresholds.
Risks
PAXG's core risk is counterparty and custodial: you are trusting Paxos's vaulting, auditing and redemption processes rather than holding metal yourself, and Paxos publishes monthly attestations rather than continuous real-time proof of reserves. Regulatory risk sits alongside this — Paxos operates under New York Department of Financial Services oversight, which has previously forced changes to its other stablecoin businesses, and a serious regulatory action against Paxos would ripple into PAXG. There's also a liquidity mismatch worth noting: PAXG trades with crypto-market volatility and around-the-clock hours even though its underlying asset, gold, is a comparatively staid, slow-moving commodity, so token price can diverge briefly from spot gold during periods of crypto market stress. Finally, smart contract risk applies as with any ERC-20 asset, though PAXG's contract has been live and largely uneventful since 2019.