Paxos Labs launches PAXGy, a gold-backed token that earns yield from lending

Paxos Labs launches PAXGy to earn returns measured in gold

Paxos Labs launched a token called PAXGy on Sept. 24. The token is designed to earn returns in gold by lending the reserve assets behind it to institutional borrowers.

PAXGy is built on PAX Gold, or PAXG. Under PAXG's terms, each token represents one fine troy ounce of allocated gold, meaning gold set aside for holders rather than pooled. That gold is held by Paxos Trust on a segregated basis in LBMA-approved vaults.

PAXGy adds a lending strategy to that gold exposure. Holders' PAXGy balances stay the same, while lending income is meant to increase the amount of PAXG each token can be redeemed for. The return is measured in gold, not in dollars.

Key points on PAXGy

• PAXGy holders' balances stay constant. Lending income is intended to raise the amount of PAXG redeemable per token.
• The return is measured in gold rather than dollars.
• Paxos Labs' launch disclosure says losses or borrower defaults can push the exchange rate down, leaving holders with less PAXG.
• Gold-price moves also change the dollar value of what holders own.
• Paxos Labs' dashboard reported 61.63 fine ounces of total gold backing on Sept. 24, with 20% in a liquid PAXG reserve and 80% deployed in gold leasing.
• The product page says PAXGy is not available in the U.S. or the European Union.

Where PAXGy trades and which networks it supports

Trading access includes a PAXGy/USDG pool on Uniswap's X Layer deployment through OKX Wallet, according to OKX's launch notice. Uniswap is a decentralized exchange, a platform where trades are made by software rather than a single company.

Paxos Labs' transparency page also lists the 0x DEX aggregator as live and names Ethereum and X Layer as supported networks.

Redemptions run through approvals and a withdrawal queue

PAXGy's website terms limit direct minting and redemption to institutional counterparties that complete onboarding. The integration guide requires approved wallet addresses and says issuer redemptions return PAXG through a withdrawal queue rather than as an instant transaction. OKX says redemptions may carry withdrawal fees.

Physical delivery is a separate step. PAXG's own terms require a minimum of 430 PAXG plus fees per London Good Delivery bar. For PAXGy held on X Layer, Paxos Labs' guide says holders must move the tokens back to Ethereum before redeeming into PAXG.

How the lending model works and who competes

Paxos Labs' product page describes borrowers in the physical gold supply chain and in financing markets, but it does not name individual counterparties or specify collateral ratios. It says collateral requirements reduce default risk but do not remove it.

PAXGy starts against a much larger underlying asset. CoinGecko recorded roughly 434,899 PAXG in circulation and a market capitalization of about $1.85 billion on Sept. 24. Market capitalization is the total value of all tokens in circulation. Tether Gold's market value was about $2.66 billion that evening.

The lending model also has competition. Theo's thGOLD launched in January. Theo says it tracks the MG999 Onchain Gold Fund, which makes gold-denominated loans to retailers, with Singapore's Mustafa Gold as its first borrower.

What is confirmed about PAXGy

• Paxos Labs launched PAXGy on Sept. 24, according to its own announcement and press release.
• The token is designed to earn gold-denominated returns by lending reserve assets to institutional borrowers.
• Paxos Labs' own disclosure states that losses or borrower defaults can lower the exchange rate and leave holders with less PAXG.
• The dashboard showed 61.63 fine ounces of total gold backing on Sept. 24, split 20% liquid PAXG reserve and 80% gold leasing.
• Ethereum and X Layer are listed as supported networks, and a PAXGy/USDG pool is available on Uniswap's X Layer deployment through OKX Wallet.
• Direct minting and redemption are limited to onboarded institutional counterparties, and issuer redemptions return PAXG through a withdrawal queue.
• PAXGy is unavailable in the U.S. and the European Union, according to the product page.

What is still unclear

• The names of the borrowers and the collateral ratios used in the lending strategy are not disclosed in the supplied material.
• The amount of lending income actually earned, and whether the exchange rate has risen since launch, is not stated.
• The size of any withdrawal fees is not specified.

Why this matters for holders of tokenized gold

PAXG gives holders exposure to allocated gold without a lending step. PAXGy adds a lending strategy to that exposure, so holders can potentially earn gold-denominated income. The trade-off, based on the company's own disclosure, is credit risk: if borrowers default or loans lose money, the amount of PAXG each token is worth can fall.

PAXGy also enters a market where other yield-bearing gold tokens already exist, and it starts small compared with the PAXG and Tether Gold markets.

Sources

• The Defiant