Paxos, the operator of the itBit cryptocurrency exchange and the issuer of the popular Paxos Standard (PAX) stablecoin, has launched a gold-backed token called PAX Gold (PAXG).
Bearing the ticker PAXG, each token is backed by 1 ounce of gold stored in a London vault. The token has been issued on the Ethereum blockchain, similar to the dollar-pegged coin.
The New York-based firm believes that issuing a token backed by physical gold on the blockchain will attract interest from both camps – enthusiasts of the commodity as well as cryptocurrency proponents. Following approval from the New York Department of Financial Services, gold investors can now trade PAXG against dollars on itBit.
Paxos CEO Charles Cascarilla regards the gold-backed token as a solution to one of gold’s biggest hurdles as an asset, and namely immobility. Since it is costly, takes time and effort to move gold around, investors speculating on its price usually trade derivatives rather than holding gold directly.
“Either you can make gold very tradable or you can own real gold […] and very tradable gold is not real gold.” said Cascarilla.
By tokenizing gold on the Ethereum blockchain, Paxos is aiming for PAXG to be real gold that is also highly tradeable. On Paxos’ website, customers can convert their tokens to and from fiat currency or unallocated gold, or redeem tokens for physical gold bars. At any time, token holders can look up the serial number, brand code, gross weight, and fine weight of their gold bar holdings using an Ethereum wallet address. Cascarilla stated:
“PAX Gold solves these fundamental challenges. It’s as easy to trade as ETFs or bitcoin, is extremely mobile and divisible, and it also gives holders ownership to the highest quality gold in the world.”
PAXG becomes a new way to invest in gold, as well as provides cryptocurrency investors with an asset that would be less volatile compared to the rest of the industry, allowing for portfolio diversification.
“It’s never been easier to own or trade gold and we are thrilled to give both institutions and individuals access to gold in a faster and cheaper way. By putting gold on a blockchain, we’re democratizing access to gold.” according to Cascarilla
The new token already has potential suitors with Genesis Global Trading and SALT Lending, two of the bigger firms in the cryptocurrency lending space. Genesis is set to accept lending deposits in PAXG and SALT will accept PAXG as a collateral option.
The market for investment-grade gold is around $3.5 trillion, dwarfing the market capitalization of all digital assets combined. With an average daily trading volumes for gold over $110 billion, Paxos aims to address at least a portion of this market with PAXG.