Paxos advertised the cryptocurrency as the first-ever crypto-asset to be redeemable for physical gold. The sentiment was approved by the New York State Department of Financial Services (NYDFS). The NYDFS also released a statement confirming that the cryptocurrency was backed by gold. The NYDFS also stated it to be the “first gold-backed virtual currency in New York State.
How does it Work?
According to Paxos, each PAXG token will be backed by one fine troy ounce of London Good Delivery gold. The physical gold will be stored in a professional vault in London.
The key idea is that users own the physical gold through ownership of these PAXG tokens. However, the tokens have much more liquidity than gold and can move like any other ERC-20 tokens. Similarly, Paxos charges fees for all on-chain transactions involving PAXG.
According to Paxos CEO, although Gold may be a very stable and secure hedge fund, it is very primitive for this day and age. According to him, Gold has become outdated as it has little liquidity or flexibility. The main issues being that it cannot be easily divided, traded or leveraged against other investments.
He noticed that trading Gold derivatives like Exchange Traded Funds are easy. Nonetheless, it is not ownership of physical Gold, and accessibility is restricted. Furthermore, he said that buying Gold from retail outlets is risky, as the quality of the product is unverified.
According to the company’s website, PAXG tokens can be exchanged for fiat currency as well as unallocated gold or physical gold bars. Moreover, users can verify the quality of these gold bars.
Paxos’ recent activity
The company has also collaborated with cryptocurrency exchange Binance to launch stablecoin backed by the US dollar.