Stablecoin issuer Paxos—whose PAX token trails only Tether and USD Coin in market cap—today announced the launch of a regulated gold stablecoin, called PAX Gold (PAXG).
The New York State Department of Financial Services (NYDFS) has approved the Ethereum-based token, according to a press release, which Paxos claims makes it the “first regulated digital gold product.”
Each PAX Gold token will be physically backed by one fine troy ounce (weighing at 31 grams) of gold that meets the London Good Delivery standard—ensuring the gold meets a set criteria for purity—and is stored in a London vault. The token can be redeemed on the Paxos website for fiat currency, unallocated gold—where a bank lends out its own gold—or for gold bars.
“In a digital and global financial system, owning physical gold is a cumbersome, outdated investment; it’s not easy to trade, divide, move or leverage against other investments,” Paxos CEO Charles Cascarilla said, in a statement.
Cascarilla added that there are a number of solutions to the problem of owning physical gold, such as ETFs and futures trading platforms, but that these do not represent legal ownership of physical gold. Instead, PAX Gold will be easy to trade—and divisible—while allowing users to retain ownership.
Being an Ethereum token, it comes with some side benefits. Similar to supply-chain tracking on the blockchain, customers will be able to use their blockchain addresses to see information about the gold. These include the serial number, brand code, gross weight, fineness (its purity level), and the weight of their gold bar holdings.
There have been numerous gold-backed stablecoin projects over the last two years, including Novem gold. But, they have struggled, a report by The Next Web found gold-backed stablecoins accounted for two-thirds of all failed stablecoins. Will Paxos fare any better?