KETJU Research

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Tokenized commodities

Paxos Gold (PAXG)

Rejected The evidence weighs against it
Issued
2026-09-23
Last confirmed
2026-09-23
Next check due
2026-12-23
Research basis
Individual research
Chains
Ethereum · No freeze key, Solana · Governed, no freeze
Symbols
PAXG
Eligibility file
What the holder owns and who may hold it

A PAXG token is a warehouse receipt for one fine troy ounce of gold. Paxos Trust Company, N.A., a national trust bank the OCC has supervised since its New York charter converted on 2025-12-12, holds London Good Delivery bars in segregated accounts for PAXG holders. The terms say a holder owns “a pro rata portion of Allocated Gold,” and Paxos shows the serial numbers of the bars behind any address. KPMG attests the reserve each month. The 2019 white paper on paxg.com names Brink’s London vaults; the current terms say only LBMA vaults in London and name no operator. PAXG now lives on two chains. Paxos launched it on Solana on 2026-06-25 as a Token-2022 mint with a permanent delegate, and upgraded the Ethereum contract so tokens can move between the two. On both chains Paxos can freeze any address and take its tokens: on Ethereum through freeze and wipeFrozenAddress, on Solana because the freeze authority and the permanent delegate are the same Paxos address. The terms let Paxos freeze on a legal order, on a partner’s notice, or “in its sole discretion.” The adverse assessment stands, now on one ground rather than two. On 2025-10-11 PAXG traded about 22% below spot gold on Binance, and on 2025-10-17 several percent above it. The price can only be pulled back to gold by a verified Paxos customer who buys the cheap token and redeems it, and that loop takes an account, fees, and several business days. Nothing in the Solana launch changes who can redeem or how fast; Solana DEXs add places to sell, not a way to redeem. The earlier memo also leaned on the NYDFS order of 2025-08-07 as a failure inside the last twelve months. That window closed on 2026-08-07, and this review found no later enforcement action against Paxos, so the order is now history, not a current finding. A client who wants gold is better served by a physically backed gold ETF, whose authorized participants can create and redeem shares every trading day.

The research file

What the holder owns

Section 5.1 of the PAX Gold terms (last modified December 12, 2025) calls PAXG “akin to a warehouse receipt representing your beneficial ownership of a pro rata portion of Allocated Gold.” Paxos Trust holds the bars and keeps them apart from its own assets; paxg.com describes the reserve as bankruptcy-remote. Paxos maps each address’s balance to specific bars and reallocates as tokens move, so the chain is the record and there is no transfer agent. PAXG is not a security under Paxos’s reading: the 2019 white paper cites legal advice that it is neither a security nor a futures contract, and the eligibility file records it as a commodity receipt. Paxos charges no storage fee today, but Section 15.2 lets it start one after 30 days’ notice and collect it by minting new PAXG, which dilutes every holder’s share of the bars.

Vault and assurance

Paxos’s product page says the bars sit in LBMA vaults in London. The 2019 white paper, still hosted on paxg.com, names Brink’s bullion vaults in London; the current terms and product page name no operator. The earlier memo said no Paxos source confirmed Brink’s; the white paper does, though it is seven years old and a change of vault would not have to be announced there. KPMG has attested the reserve monthly since the February 28, 2025 report, succeeding Withum, and Paxos’s Solana launch post says Bureau Veritas audits the bars physically once a year. A monthly attestation checks ounces against tokens on one date; it does not test who may reach the bars in an insolvency.

Two chains and who controls each

On Ethereum, PAXG is an upgradeable proxy at 0x45804880De22913dAFE09f4980848ECE6EcbAf78. The verified implementation carries freeze, wipeFrozenAddress, pause, mint, and upgradeTo. The owner and default admin is a timelock, 0x6d8b8f7e…3acc, with an 86,400-second (one-day) delay, so an upgrade is visible a day before it takes effect; pausing belongs to a separate role holder, 0x3af3e85f…024b. Paxos rebuilt the Ethereum contract on its shared PaxosTokenV2 code for cross-chain use, and Zellic audited the change.

On Solana, PAXG is a Token-2022 mint at 5GgRAEmv8ZxF2PR5hY72Qs5x1bnQ6UK2RbTPoqJ3wSwW. One Paxos address, 2apBGMsS…YJjk, is both the freeze authority and the permanent delegate, which lets it move or burn tokens out of any holder’s account without the holder’s signature. Minting belongs to a 1-of-4 multisig, Ertp4yV6…mzfk, so any one of four keys can mint. On 2026-09-23 the transfer fee was zero and no transfer hook was set. Tokens cross between chains through Paxos or LayerZero’s Stargate, which adds a messaging layer to the Solana supply that the Ethereum supply does not carry.

Paxos has used these powers on PAXG before: on 2022-11-12, at the direction of US law enforcement, it froze 11,184.38 PAXG (about $19 million) across four addresses tied to funds taken from FTX, and later burned them. Section 14 of the terms lets Paxos freeze any holder’s PAXG, customer or not, and seize the tokens to a Paxos wallet under a binding legal order.

The October 2025 break from gold

On 2025-10-11 PAXG fell from about $3,950 to about $3,087 on Binance, roughly 22%, far outside gold’s usual daily move of about 2%; leveraged positions posted with PAXG as collateral were liquidated. On 2025-10-17 it overshot the other way, touching about $5,106 on Binance perpetuals against spot near $4,790, about 7% over. These figures come from independent write-ups, not a Paxos or Binance post-mortem, so treat the size as approximate; the direction and the cause agree across sources.

The cause is the redemption loop. Only verified Paxos customers may buy PAXG from Paxos or redeem it (terms, Section 4.11). A customer who buys cheap PAXG on Binance must withdraw it, send it to Paxos, and convert it: to dollars at a streaming gold price, which Paxos says may take several business days to show plus up to two days to withdraw, or to a whole bar, which takes at least 430 PAXG plus fees. From 2026-09-01 Paxos also charges 0.125% to 0.500% on a customer’s net redemptions over 30 days, while waiving creation fees through 2027-01-01. The fee is small against a 22% gap; the binding limits are who may redeem and how long it takes. A gold ETF closes the same gap through authorized participants who create and redeem shares daily.

The 2025 NYDFS order

NYDFS fined Paxos $26.5 million on 2025-08-07 and required about $22 million of anti-money-laundering remediation. The consent order found Paxos had not independently checked Binance’s AML claims while the two issued BUSD, and traced $1.6 billion of transactions linked to sanctioned persons, darknet markets, and Ponzi schemes through that relationship. The order concerns Paxos’s controls, not the gold behind PAXG. The earlier memo treated it as a failure inside the last twelve months and made twelve clean months a review trigger. That period ended on 2026-08-07. This review found no later enforcement action against Paxos, and supervision has since moved to the OCC, so the order no longer carries the assessment.

Who may buy, hold, and redeem

Anyone may hold PAXG in a wallet and move it freely unless Paxos has frozen it. Buying from Paxos and redeeming take a verified Paxos account, open to individuals for personal use and to companies; the terms do not name trusts or IRAs. The smallest purchase on Paxos.com is 0.03 PAXG, because the creation fee is 0.02 PAXG, and there is no minimum holding. Paxos says PAXG is not offered in the EU and publishes no list of US states. A client who holds PAXG through an exchange or a wallet without a Paxos account can exit only by selling, which is the exit that failed in October 2025.

Comparison and decision

Against Tether Gold (XAUT), PAXG is the better-documented token: a named national trust bank as issuer, bar-level allocation anyone can check, monthly KPMG attestation against XAUT’s quarterly reports, and a vault the issuer has named at least once. Against a physically backed gold ETF held at a custodian, PAXG adds an issuer that can freeze and take tokens on either chain, a second chain and a bridge, and a redemption loop open only to Paxos customers that failed to hold the price in the one real stress event on record. The adverse assessment rests on that last fact. It reopens when PAXG holds its gold value through a later stress event or when Paxos opens a faster, wider redemption path.

Sources

The claims above trace to these. Where a number could not be independently verified, the thesis says so.

Inherited controls

The research above describes the protocol layer. Every position also inherits the asset it holds and the chain it settles on. The layer with the most administrative power sets the position’s effective control; that describes control, not quality or suitability.

ChainVerdictControlControl constraint
EthereumApproved No freeze key No sequencer, no upgrade key, no operator who can be compelled. Rule changes require social consensus.
SolanaApproved with limits Governed, no freeze no admin key can seize funds, but stake concentration and a sub-25 Nakamoto coefficient are the standing watch items.
AssetControlWho can freeze it
PAXG Issuer can freeze Paxos Gold. Allocated London bullion held by Paxos, who can freeze the token.
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