PAXG tends to emphasize regulated trust custody and direct bar allocation per token. XAUT emphasizes allocated ownership claims with a different corporate/regulatory posture. Your choice should hinge on redemption friction, counterparty/custody trust, where you’ll use the token (chain/DeFi), and all-in fees (not just gas).
Gold-backed crypto has escaped the niche. As bullion rallied and real-world asset tokenization matured, Tether Gold (XAUT) and Paxos Gold (PAXG) emerged as the two dominant ways to hold ounces on-chain. They are not “digital trinkets” or ETFs in disguise; each unit is a claim on vaulted metal. The catch is simple: tokenized gold inherits both gold-market plumbing and blockchain risk. In 2025, that mix is powerful and unforgiving.
Markets noticed. Reports tracking tokenized metals show XAUT and PAXG capturing the vast majority of the sector and riding gold’s upswing while liquidity and holder counts expanded. Research hubs have chronicled how these tokens tracked spot, where they deviated, and which chains and platforms truly support them, from centralized venues to DeFi rails. For traders, stackers, and yield seekers, the question is less “should I own tokenized gold?” and more “which token, where, and under what constraints?”
Before we dive in: tokenized gold ≠ coins in your hand. Delivery, KYC, vault jurisdiction, and issuer solvency still rule your destiny. Treat this as a guide to the trade-offs that matter when you swap fiat or crypto for on-chain ounces.
Tokenized Gold: XAUT vs PAXG — Fast TL;DR and How It Works
If you want the most regulated trust structure and direct bar allocation per token, PAXG is typically the safer pick. If you prioritize allocated ownership claims from a large stablecoin issuer with a different regulatory footprint, XAUT offers a compelling alternative. Both are 1:1 with fine gold in professional vaults, but the legal framing, custody details, and redemption experiences diverge in ways that matter at settlement time.
How tokenized gold works in plain terms: an issuer locks bullion in a vault and mints tokens that represent title to that metal. Your balance is recorded in a smart contract; the bar list or allocation report ties tokens to serial-numbered bars in the vault system. There are two trust layers you can’t bypass:
- Issuer/custodian layer: Are you holding a claim on allocated bars under a clear legal trust? Who regulates the issuer? Who actually stores the metal and insures it?
- Blockchain/contract layer: Which chain is native? Are admin keys, pausability, or blacklist functions present? How are upgrades handled?
In 2025, tokenized gold demand swelled as gold outperformed many assets and tokenization infrastructure matured. Industry roundups highlight that XAUT and PAXG account for the lion’s share of a market measured in billions, with liquidity increasingly concentrated on a few exchanges and pools. For context on the broader trend and market shares, see analyses from independent outlets and exchanges such as GoldSilver’s sector overview, Blockonomi’s coverage of 2025 gains, and this comparative review by XT.com. For a deeper primer on how tokenized gold differs from ETFs or derivatives, bookmark CoinGecko Learn.
Who should consider which token, at a glance:
- DeFi users on Ethereum: pick the token with deeper on-chain liquidity where you plan to LP, borrow, or collateralize.
- Off-ramp to metal later: prioritize the issuer with clearer user-level redemption logistics and transparent bar allocation/serial lookup.
- Short-term traders: tighter spreads and deeper order books matter more than vault nuance.
- Long-term digital vault: custody language, audits, and freeze/blacklist policies should drive the decision; consider splitting exposure.
A quick reality check: most holders will not redeem a 400 oz London Good Delivery bar. Liquidity events happen on exchanges and in DeFi; trucks deliver bars far less often. The trade, therefore, lives and dies on spreads, fees, and the credibility of the claim.
| Dimension | PAXG (Paxos Gold) | XAUT (Tether Gold) |
|---|---|---|
| Legal/Custody Framing | Regulated trust company model; direct allocation to specific bars per token | Allocated ownership claims via issuer entity; different regulatory posture |
| Vaulting/Jurisdiction | Professional LBMA ecosystem vaults; serial-number lookup offered | Professional Swiss/European vaults; allocation and bar lookup available |
| Chains (Native) | Ethereum ERC-20 native; others via bridges/wrappers | Ethereum ERC-20 native; some issuance on additional chains per issuer communications |
| Redemption | Full-bar redemption for eligible users; KYC/AML; timelines apply | Bar-scale redemption; KYC/AML; location-specific logistics |
| Typical Use | Regulated custody emphasis; portfolio ballast; DeFi where supported | Broad exchange presence; on-chain mobility; DeFi where supported |
For narratives, cointegration with broader RWA trends, and practical trading notes, compare independent takes like Yellow Research’s 2025 comparison, Flashift’s XAUT/PAXG overview, and this digest of investor behavior on Seeking Alpha. Each will help you calibrate expectations before you wire funds or sign an approval transaction.
Bottom line for this section: think layers—issuer trust, vault location, chain risk, and platform liquidity. Your returns and sleep both depend on where you place that trust.
Issuer and Custody Comparison for Tokenized Gold: Regulated Trust vs Allocated Claims
Everything starts with who holds the metal and under what legal architecture. That is where PAXG and XAUT consciously diverge. Both assert full backing by fine gold stored in professional vaults, but the ownership pathway you rely on differs. In a stress scenario—think sanctions, insolvency, or legal orders—the nuances drive outcomes.
PAXG: Issuer, Trust/Custody Model, Jurisdiction, Oversight
Paxos issues PAXG under a regulated trust company structure, with oversight that emphasizes customer asset segregation from corporate assets. The design goal: if the issuer fails, the gold should remain separate, with clear title for token holders. PAXG markets direct bar allocation; each token maps to a specific bar, with serial lookup tools so you see the bar ID(s) associated with your holdings. Storage is within the LBMA vault ecosystem, and regular attestations support the 1:1 backing claim.
Investors drawn to regulated custody often cite three benefits: stringent oversight, explicit segregation of assets, and a published cadence of attestations. The trade-off is predictable: you operate in a stricter KYC/AML environment with limited flexibility around jurisdictions and redemption pathways. Still, for allocators subject to compliance or for those who prioritize oversight and bar-level transparency, PAXG’s model is compelling.
XAUT: Issuer Entity, Custody Model, Vaulting Jurisdiction, Allocation
Tether Gold (XAUT) is issued by an affiliated entity that emphasizes allocated ownership claims to specific bars. The company discloses vaulting in reputable European jurisdictions—commonly discussed as Switzerland—with bar identification and lookup features. The message is straightforward: your token corresponds to ounces on a bar in a vault, and the issuer can show it.
Because the Tether group also runs the largest fiat stablecoin, XAUT benefits from the brand’s distribution and exchange integrations. The regulatory posture is different from a trust company, and some buyers will prefer it, others will not. The upside can be practical: availability across platforms and mobility across chains where officially minted. The trade-off remains the same category of risk: issuer solvency and legal environment dictate redemption reality in a crisis.
What should you verify before buying either?
- Vaulting partner: name of the vault operator(s) and whether they are LBMA members.
- Insurance wording: what is actually covered; limits; exclusions; who is the named insured.
- Attestations/audits: frequency, independent provider, and whether the reports reconcile chain supply to bar lists.
- Bar lookup: can you see serial numbers tied to your tokens or just to aggregate holdings?
- Legal segregation: trust language vs corporate custody; what happens if the issuer becomes insolvent.
Independent roundups can help you cross-check these claims. Start with Yellow Research, pair it with a pragmatic trading lens via this Medium comparison, and add a market breadth scan from Alpha Bullion’s RWA explainer. If you’re exploring adjacent projects that aren’t yet battle-tested, exercise extra diligence—issuer-hosted materials aren’t a substitute for third-party routines.
Case in point: Maya, a portfolio manager running a crypto multi-strat, chose PAXG for a fund sleeve that must pass internal compliance screens—a direct bar allocation policy and regulated trust were decisive. Leo, a market maker focused on 24/7 gold basis trades, prefers XAUT because his venues and counterparties price it with tighter spreads. Same metal, different constraints. Your constraints are your edge.
Final thought for this section: custody and legal setup aren’t glossy fine print; they are the product. The vault and the contract define how your “digital gold” behaves under duress.
Redeeming Tokenized Gold for Metal: Minimums, KYC, and the Real Exit Path
Every gold token advertises “redeemable for physical,” but the path is rarely a courier dropping a kilo at your door. Expect KYC/AML, ticket sizes that skew to full bars (London Good Delivery ≈ 400 oz) or kilobars, issuer fees, and location constraints. If you are not already set up with bullion logistics, you’ll likely off-ramp via exchanges rather than requesting delivery.
Key moving parts you must line up before attempting redemption:
- Minimum size: issuers often require full LGD bars for direct redemption; some offer kilobar options in specific vaults.
- Identity and compliance: full KYC/AML onboarding; additional checks for certain jurisdictions are common.
- Fees and spreads: redemption fee, handling, potential fabrication (for kilobars/coins), and shipping/insurance if removal from vault is allowed.
- Timeframes: settlement can take days; holidays and vault cutoffs matter.
- Location limits: redemption might be available only in designated vaulting locations; export may require additional fees and paperwork.
Can you target a specific bar? With bar-allocated models, institutions redeeming at size can usually request specific serials subject to availability. Retail users may only redeem from the pool or via intermediaries that handle conversion into smaller products. Timelines vary; some programs batch redemptions and settle within a week, others faster for well-prepared clients.
Reality check for most users: the efficient exit is to sell on a liquid exchange or unwind in DeFi, then take fiat or stablecoins. Redemption is a different business—great when you absolutely need bars in a vault you control, not so great if you’re chasing basis trades or short-term hedges. Liquidity profiles during stress also inform strategy; historical episodes show brief premiums/discounts versus spot when order books thin or gas spikes. For color on 2025 order flow and how tokenized gold traded around a hot ETF narrative, skim the data-driven angles in this coverage and the sector scans on XT.com.
An anecdote: a prop desk attempted a kilo redemption to arbitrage a local premium. By the time compliance cleared and logistics were priced, the arb evaporated. They pivoted—sold tokens on-exchange, routed fiat to a local dealer, and captured most of the spread without touching a vault. This is why many teams treat redemption not as a trading tool but as a contingency plan.
If you insist on redeeming, prepare like a professional:
- Complete issuer KYC well in advance; test a small operational flow (e.g., address whitelisting) before size.
- Confirm minimum bar sizes and whether kilobars are available where you need them.
- Price all line items—redemption, shipping, insurance, fabrication, custody transfer—before initiating.
- Get an estimated settlement timeline in writing and avoid initiating near holidays.
A resource that compares how these tokens operate in practice—including liquidity, premiums, and redemption narratives—can be found in this research and a pragmatic overview at Flashift. Understanding how others actually exit will save you time and money.
Closing insight: use redemption as a feature, not a crutch. Liquidity is king for day-to-day management; metal delivery is a separate, slower game.
Fees for XAUT and PAXG: Issuer, Network, Platform — Calculate the Real Cost
Gold’s narrative won’t save you from a bad fill. With tokenized bullion, the total cost blends three layers: issuer fees (mint/redeem/management), network fees (gas), and platform fees (exchange taker/maker, DeFi swap, bridge tolls). Sloppy routing turns a 10 bps trade into a 100 bps leak.
Issuer-side items to locate on the schedule of fees:
- Mint and redemption: percentage fees with minimum dollar amounts; sometimes tiered by size.
- Custody/management: some structures bake storage into the product; others assess periodic fees.
- On-chain transfer fees: distinct from gas; some issuers charge a small fee when moving tokens between addresses.
Network fees depend on where the native token lives. Ethereum L1 gas can spike during risk events, while L2s cut costs but may require bridges or wrapped representations. If you venture beyond native chains, add bridge fees and slippage. The wrapper/bridge risk you accept should pay you back in either yield or lower total costs; otherwise, stay native.
Platform fees are the sleeper. CEX taker fees, DeFi pool spreads, and routing/MEV slippage can dominate your P&L. A single-hop swap in a shallow pool is often worse than a CEX trade plus a single withdrawal. Use pro tooling or at least manual quotes across routes. Aggregators can help, but verify outcomes by simulating size. If you’re exploring alternative venues and liquidity hubs, map new platforms carefully; as with any emerging service, start small and confirm execution—resources like Basis Gold can be part of a discovery workflow, but diligence remains non-negotiable.
Formula: All-in cost = spread + (issuer fee) + (exchange/DeFi fee) + gas
Two quick scenarios to illustrate the math:
- On-chain swap (native PAXG): 8 bps pool spread + 20 bps swap fee + $6 gas ≈ 0.28% on $10k notional. If gas spikes to $40, cost jumps to ~0.68%.
- CEX round-trip (XAUT): 10 bps taker in/10 bps out + 5 bps withdrawal + $5 network fee ≈ 0.25% plus network. If you cross the spread in a thin book, add 10–20 bps impact.
Don’t forget carry. If an issuer applies a periodic custody fee, it’s functionally like an expense ratio. Many tokenized gold products pitch “no storage fee,” but read the fine print—some costs shift to redemption or transfer. For a sense of how these tokens tracked price (and when spreads/premiums widened), see the historical context in this industry write-up and a market trends digest on Blockonomi.
Execution checklist to avoid “death by bps”:
- Quote native chain vs bridged alternative; add bridge risk premium explicitly to your decision.
- Compare CEX book depth vs DEX pool depth for your size; simulate both routes.
- Batch transactions when possible; use gas controls and L2s judiciously.
- Track net position vs spot reference; do post-trade cost attribution monthly.
Final line: probability-adjusted risk and cost per ounce should drive routing. The cheapest-looking path is often the wrong one.
Supported Chains, Wallets, Liquidity and Price Behavior for XAUT vs PAXG
Where you plan to use tokenized gold determines which token you should hold. Native chain support and wallet compatibility gate everything from collateral usage to gas predictability. Both PAXG and XAUT are natively issued on Ethereum (ERC-20); beyond that, availability becomes a patchwork of bridges and exchange IOUs. Prefer native issuance whenever possible; wrapped versions add bridge risk and potential redemption friction.
Wallets: hardware stalwarts and major software wallets handle ERC-20s broadly, so custody isn’t the limiting factor. The constraint is platform integrations. Can you borrow against PAXG or XAUT on your preferred money market? Is there a stable/gold pool deep enough for your size? Will your centralized lender recognize either token as collateral? Each “yes” or “no” shapes the investment case far more than marketing copy.
Liquidity: spreads are usually tight during calm periods, but depth varies widely across venues. Some exchanges show consistently deeper XAUT books, others lean toward PAXG; this flips over time as market makers calibrate inventory. Stress regimes tell the truth: when BTC and ETH volatility spikes, tokenized gold books can thin and drift from spot. Historical snapshots in 2025 coverage—see this investor note and XT.com’s market overview—document how depth and holder growth evolved as gold outperformed.
DeFi primitives: not all gold pools are equal. Many are small, and oracle design matters: relying on thin CEX feeds creates circular risk. Test with small size, check slippage at realistic trade amounts, and confirm that oracles handle premia/discounts to spot during stress. Researchers tracking tokenized gold trends in 2025, like Yellow, note that while both tokens gained traction, usage concentrates where venues and lenders deliberately support one ticker over the other.
On performance relative to spot: in the last year, both tokens experienced periods where they edged above or below spot gold by a few basis points to low single digits during dislocations. That’s normal when settlement rails differ. What isn’t normal is persistent discounts without an operational reason; treat those as sirens—either fees moved, a venue’s risk limits changed, or the market is signaling counterparty concerns. Cross-reference events with sector updates like industry newsrolls and multi-venue snapshots such as this comparison.
Practical routing for a DeFi-native user:
- Prefer native ERC-20 balances for collateral; avoid bridged variants unless yield compensates.
- Keep separate wallets for trading and vaulting; limit approvals; monitor admin-key and blacklist policies.
- When farming, model IL from a gold/stable pair across plausible gold moves; don’t assume flat.
- Track venue outages and chain congestion windows; gold isn’t immune to crypto’s operational risk.
For an overview that blends market share, token traits, and trading behavior, cross-check Alpha Bullion’s explainer with a more data-heavy pulse like Blockonomi. If you’re scanning newer entrants or wrapped variants, a sanity pass via this Medium piece can alert you to documentation gaps.
Takeaway: hold the token that the rails you actually use support natively—DeFi money markets, LP venues, or the CEXs you trust. Liquidity isn’t a tagline; it’s your floor during stress.
Risk Map for Tokenized Gold: Counterparty, Custody, Contract, Chain, Regulatory, Operational
If gold is about certainty, tokenized gold is about layered certainty. Each layer introduces a potential failure mode. You can’t eliminate risk, but you can decide where to concentrate it—and where not to.
Counterparty risk:
- Issuer insolvency or sanction: What happens to the bars? Under a trust structure, assets should be segregated; under other models, read the legal recourse. Sanctions can force freezes.
- Freeze/blacklist functions: Many compliant tokens include admin controls. Understand who can freeze and under what conditions.
Custody risk:
- Vault failure, insurance gaps: Insurance is not FDIC. Policies have limits and exclusions; verify who is insured and whether coverage matches total float.
- Rehypothecation fears: Allocated vs unallocated matters. Insist on allocation language and reconciliation reports.
Contract risk:
- Smart-contract bugs: Even simple ERC-20s can break with upgrades, proxies, or permissioned hooks.
- Admin keys: Who holds them? Multisig? What emergency powers exist?
Chain/bridge risk:
- Reorgs and congestion: Ethereum is robust but not infallible; stress events widen settlement windows.
- Bridge compromises: Wrapped versions inherit bridge risk and usually aren’t redeemable until unwrapped to native.
Regulatory risk:
- Jurisdictional restrictions: Redemptions can be refused if KYC fails or if your region falls under sanction.
- Classification shifts: A regulator can re-interpret how a token is treated, altering disclosures, audits, or allowed activities.
Operational risk:
- Redemption minimums and delays: Full-bar minimums restrict retail redemption; holidays slow everything.
- Oracle and liquidity failures: Thin pools and bad oracles can cause depegs and liquidations in DeFi.
Historical perspective helps. Earlier gold token experiments proved the concept but also showed why transparency, audits, and vault clarity are essential. Today’s leaders learned those lessons, but investors still need to enforce discipline. Take a page from institutional playbooks: split exposure across issuers, keep portions off-bridge, and rehearse your unwind path. For ongoing monitoring of market structure and adoption, keep tabs on resources such as Yellow Research, CoinGecko Learn, and macro-linked adoption stories like this Seeking Alpha analysis.
One framing to close: risk cannot be offloaded, only transformed. Pick where you want to hold it—issuer, vault, chain, or venue—and size accordingly.
Use-Case Guidance and Pre-Buy Checklist for Choosing Between XAUT and PAXG
It’s easy to get lost in vault photos and smart-contract addresses. Anchor your decision in the use-case you actually have, and build a checklist that forces you to verify claims. A good framework turns “gold on-chain” from a hunch into a repeatable process.
Use-case guidance:
- DeFi collateral or on-chain yield: choose the token with native support on your chain and stronger audits/liquidity at the venues you’ll use. If an L2 requires a wrapper, demand extra yield for bridge risk.
- Off-ramp to metal later: favor the program with clearer user-level redemption playbooks and visible bar allocation/serial lookup.
- Short-term trading: pick the ticker with tighter spreads and deeper CEX depth today; this can change, so re-check weekly.
- Long-term digital vault: treat tokens like custodial claims. Split across issuers, prefer native networks, and audit your approvals quarterly.
Pre-buy checklist you can copy-paste into your runbook:
- Jurisdiction & regulator: who regulates the issuer; what legal entity issues the token.
- Custody wording: allocated/segregated vs pooled; vault location; insurance specifics.
- Audit/attestation cadence: monthly? quarterly? independent provider? reconcile to chain supply.
- Redemption minimums & fees: full LGD bar or kilobar; handling, fabrication, shipping.
- Chain support: native vs wrapped; bridge design; L2 availability.
- Blacklist/admin-key policy: who can freeze; emergency procedures; upgrade process.
- Exchange listings: CEX depth today; DEX pools; money market support status.
- Historical deviations: any extended premia/discounts vs spot during stress; reasons documented?
Ava, a DeFi risk lead, keeps her gold allocation simple: native ERC-20 balances only, no bridges, collateral only where she can read the oracle design, and a standing relationship with two CEXs that quote both PAXG and XAUT. When she needs yield, she demands a spread wide enough to compensate for IL and oracle risk. Leo, the trader, rotates between tokens depending on which has better two-sided markets that week. They both win by aligning the token with the job at hand.
For continuous market intelligence, triangulate differing perspectives: a market trends rundown at Yellow, an adoption snapshot via Seeking Alpha, and historical performance highlights from GoldSilver. For comparisons and where-to-trade angles, see this overview and a quick primer on Flashift.
Questions fine-tuned for action, not theory:
- Does my chain-of-choice natively support the token I want?
- Will my lender or exchange haircut one token more than the other?
- Do I know the cost to get out fast, across two different routes?
Finish every review with a live test: buy a tiny amount, move it, quote multiple exits, and document the friction. Theory ends where settlement begins.
Can I really redeem one token for a coin/bar? What minimums apply?
Typically, no—retail-sized redemptions for a single-ounce coin are uncommon directly through issuers. Programs often require full London Good Delivery bars (~400 oz) or kilobars in specific vaults. Some issuers facilitate smaller conversions via partners, but it’s not universal. Expect KYC, fees, and location constraints.
Is there an annual storage fee baked in?
It depends. Some models bake storage into the product and recoup via mint/redeem or transfer fees; others disclose explicit periodic custody fees. Read the issuer’s fee schedule carefully and compare it to your expected holding period and turnover.
Are bridged versions redeemable?
Usually not. You must unwrap to the native chain to access issuer-level redemption. Bridges introduce extra risk and cost; only use them if the utility or yield justifies it.
What happens if the issuer is sanctioned or insolvent?
This is where legal/custody design matters. Under a regulated trust with segregated assets, the metal should remain separate from corporate assets. Other models may rely on different legal pathways. In any case, freezes can occur, and redemption may be paused pending legal outcomes.
How are taxes treated?
Jurisdictions vary. Many treat gains on tokenized gold as capital gains, but some may classify it similarly to collectibles with different rates. Consult a professional and verify local rules. Use reputable educational sources for orientation, then get advice tailored to your situation.
Disclaimer
Educational content only—this is not investment advice. Tokenized assets involve counterparty, custody, smart-contract, chain/bridge, and regulatory risks. Prices can deviate from spot during stress. Verify issuer disclosures, read fee schedules, and confirm local tax treatment before transacting. Trade small first, document costs, and assume operational hiccups will happen when you least want them to.