Tokenized Gold vs. the Bar in Your Safe: What PAXG and Tether Gold Actually Give You

A gold token and a gold coin can both be described as “one ounce of gold.” That shared description hides almost every difference that matters to an owner: where the metal sits, whose name is on it, what you have to do to get it back, and who else can act on your holding without asking you.

This article walks through two widely traded gold-backed tokens, PAX Gold (PAXG) and Tether Gold (XAUt), using the issuers' own published terms as of October 2026. It is an explanation of structure, not a recommendation to buy, sell, or hold anything.

What each token claims to represent

Both tokens make the same basic promise: one token corresponds to one fine troy ounce of gold held in a London Good Delivery bar. The differences start immediately after that sentence.

PAX Gold (PAXG) is issued by Paxos Trust Company, N.A. According to Paxos's PAXG product page, each token is backed by one fine troy ounce of London Good Delivery gold stored in LBMA vaults in London, and a PAXG owner “own[s] the underlying physical gold, held in custody by Paxos Trust Company.” Paxos describes the backing as allocated: each bar has a serial number, refiner stamp, and recorded weight tied to the tokens, per its January 2026 explainer on how PAXG is created.

Tether Gold (XAUt) is issued by TG Commodities, S.A. de C.V., which Tether describes as a registered stablecoin issuer and digital asset service provider under El Salvador's Digital Asset Issuance Law. Tether's January 2026 reserve announcement states that each token is backed by one fine troy ounce of physical gold held in Swiss vaults meeting London Good Delivery standards. That announcement reported roughly 520,089 XAUt in circulation against about 520,089 fine troy ounces as of December 31, 2025. The vault operator is not named in that release.

Two practical points follow:

• London vs. Switzerland. The location of the metal determines where physical delivery happens, which law governs the vault, and how far the bar has to travel to reach you.
• Disclosure depth. Both issuers say the gold is allocated. As of October 2026, neither issuer's public product page names the vault operator. If that matters to you, ask before you buy.

Who regulates the issuer

Regulatory status is where the two tokens diverge most sharply.

Paxos is now a federally chartered national trust bank. For years, PAXG was described as issued by a New York Department of Financial Services (NYDFS) regulated trust company. That changed. On December 12, 2025, the Office of the Comptroller of the Currency approved Paxos's application to convert its NYDFS limited-purpose trust charter into a national trust charter, and Paxos says it completed the conversion the same day. Per Paxos's announcement, “all of Paxos Trust Company's US-based activity will be subject to OCC supervision.” Older articles that still describe PAXG as NYDFS-regulated are out of date.

Tether Gold sits under El Salvador's framework, not a U.S. charter. Tether's materials point to sales and redemption terms published on its legal pages. U.S. readers should read those terms directly to see who may open an account with the issuer.

What about the GENIUS Act? The federal stablecoin law enacted in July 2025 (Public Law 119-27) regulates “payment stablecoins.” The statute's definition in section 2 covers a digital asset whose issuer is obligated to convert, redeem, or repurchase it “for a fixed amount of monetary value,” and it defines monetary value as a national currency or a deposit denominated in one. A gold token redeems for a quantity of gold whose dollar value floats. On the statute's plain text, gold-backed tokens do not appear to fit that definition. Regulators have not, as of October 2026, issued guidance specifically addressing gold tokens under the Act, so treat that reading as an informed one rather than a settled answer.

Redemption: the part most buyers never read

The token is a claim. Redemption is how the claim turns back into metal or money. Here is where the fine print lives.

PAXG redemption, per Paxos's own materials:

• Holders can redeem for U.S. dollars at current gold prices through Paxos, or convert to unallocated gold.
• Physical delivery of full London Good Delivery bars is available to customers holding 430 troy ounces or more. Smaller amounts can be redeemed through gold retailers that partner with Paxos, per the January 2026 explainer.
• Paxos's PAX Gold fee schedule, as of October 2026, lists creation fees as waived through January 1, 2027, and redemption fees effective September 1, 2026 that start at 0.125% and rise in bands based on an account's rolling 30-day net redemptions. A separate 0.05% fee applies to in-kind conversion into allocated or unallocated gold.
• Those creation and redemption fees apply to activity on the Paxos platform. Tokens bought or sold on an outside exchange carry that exchange's fees instead.

XAUt redemption, per Tether's own materials:

• Tether states that it delivers bars “to any address in Switzerland,” per its Tether Gold overview.
• Physical redemption is tied to full bars. Tether advises depositing about 430 XAUt to cover one bar, since a Good Delivery bar can weigh up to about 430 ounces.
• As of October 2026, Tether's public product and news pages do not state a current redemption fee schedule. Get it in writing before you rely on redemption.

The common thread: for most retail holders, “redeemable for physical gold” is a theoretical right. A full Good Delivery bar is roughly 400 ounces. If you hold a few tokens, your realistic exit is selling the token for dollars, either to the issuer or on an exchange. That puts you closer to an ETF shareholder than to someone with a coin in a safe.

Attestations are not audits

Paxos's product page says PAXG's allocated gold is “audited monthly.” Its PAXG transparency page describes the same thing as monthly attestation reports, prepared by KPMG LLP for reports posted on or after February 28, 2025, and by WithumSmith+Brown before that. Tether links an ISAE 3000 assurance report for its reserves.

These are not the same as a full audit of the issuer's financial statements. In general terms:

• An attestation examines a specific statement, such as “tokens outstanding equal ounces in the vault at month-end,” at a point in time.
• A financial-statement audit examines the issuer's entire balance sheet, including liabilities and other obligations that could matter if the issuer fails.

A clean monthly attestation is useful evidence that the bars existed on the measurement date. It tells you less about the issuer's overall solvency, its other businesses, or what happens on the other 29 days of the month. Read the report itself, note its date and scope, and do not let marketing shorthand stand in for it.

The risks that do not exist for a coin in your hand

Tokenized gold carries the metal's price risk plus several layers that physical bullion does not.

Issuer and custodian risk. Your claim runs through the issuer. If the issuer fails, the question becomes whether the gold is legally segregated for token holders and how long it takes to get it back. Paxos says its national trust bank structure requires separation of customer assets from company funds. That is a meaningful protection, but it is a legal process, not a guarantee of speed.

Freezing and blacklisting. Both tokens can be frozen by their issuers.

• The PAXG smart contract documentation states that an “asset protection role” can freeze and unfreeze the PAXG balance of any address and can wipe the balance of a frozen address. The same documentation says Paxos will not freeze balances “on its own accord.” The same documentation says Paxos can pause all transfers in a critical security event.
• An August 2025 technical review by BGD Labs, written for the Aave lending protocol, reports that XAUt's owner (a Tether multisig) can blocklist addresses and burn funds from blocklisted addresses, and that the contract is upgradeable without a timelock.

That control is a compliance feature from the issuer's perspective. From an owner's perspective, it means a third party can act on your holding without your participation.

Smart-contract risk. Both contracts are upgradeable. Code that can be changed can, in principle, be changed in ways that affect holders. Upgradeability also lets issuers fix bugs. Either way, you are trusting the people who hold the keys.

Exchange and wallet risk. If you hold tokens on an exchange, you also carry that exchange's risk. The SEC's December 2025 investor bulletin on crypto asset custody warns that if a third-party custodian “is hacked, shuts down, or goes bankrupt, you may lose access to your crypto assets,” and that some custodians lend out or commingle customer assets. If you self-custody, a lost private key generally means lost access, with no reset.

Taxes: what the IRS has said, and what it has not

The IRS treats digital assets as property, not currency. Per its digital assets page, gains and losses on assets held for investment are capital gains and losses. Brokers began reporting gross proceeds on Form 1099-DA for transactions on or after January 1, 2025, with basis reporting for certain transactions starting January 1, 2026.

The harder question is whether a gold-backed token is a collectible, which matters because long-term gains on collectibles can be taxed at up to 28% under IRC § 1(h), rather than the lower long-term rates for stocks.

• The IRS has not issued guidance specifically on fungible gold-backed tokens as of October 2026.
• In Notice 2023-27, addressing NFTs, the IRS said it intends to use a “look-through” analysis: if the token's associated asset is a collectible, the token is treated as one. Its example is that an NFT certifying ownership of a gem is a collectible, and metals fall under the same statutory category.
• Whether the IRS would apply the same reasoning to a fungible token backed by allocated bullion is an open question. The NFT notice points in that direction, but it is not a ruling on gold tokens.

Physical bullion and physically backed metal ETFs raise their own collectibles questions, covered in our physical silver vs. ETF comparison and our 2026 capital gains guide. If you hold tokens, keep your own records of purchase dates, prices, and wallet transfers, and confirm treatment with a tax professional before you file.

How the three forms of “owning gold” compare

Here is the structural comparison, stated plainly.

Physical bullion you hold

• You possess the metal. No issuer, smart contract, or exchange stands between you and the coin.
• Counterparty risk is reduced, not zero: you still depend on the dealer you buy from, the market you sell into, and wherever you store it. See our storage guide.
• Costs show up as the premium over spot when you buy, the spread when you sell, and storage and insurance.
• Nobody can freeze a coin in your safe. Theft, loss, and authenticity are your problems.

Physically backed gold ETF shares

• You own shares of a trust, held through a brokerage account. Retail shareholders generally cannot redeem shares for metal.
• You get exchange liquidity during market hours and an annual expense ratio.
• Your protections come from securities law and your broker's custody arrangements.

Gold tokens (PAXG, XAUt)

• You hold a claim on allocated gold, recorded on a blockchain, issued by a specific company under a specific regulator.
• You can transfer tokens around the clock and in fractions.
• Physical redemption exists but, in practice, begins at a full bar.
• The issuer can freeze, wipe, or burn balances under defined conditions, and the contracts can be upgraded.
• Exchange and wallet risk stack on top of issuer risk.

For a broader look at how gold compares with crypto-native assets, see our gold vs. bitcoin comparison. That article addresses bitcoin itself, not gold tokens, which sit in between the two worlds.

Questions to answer before you buy any gold token

• Who is the issuer, and who regulates it today? Check the issuer's current pages. PAXG's regulator changed in December 2025.
• What does the latest attestation actually cover? Note the preparer, the date, and the scope.
• Can you, specifically, redeem with the issuer? Look for account eligibility, minimums, fees, and delivery location.
• Where will you hold the token? On an exchange, you add that exchange's risk. In your own wallet, you take on key management.
• What happens if the issuer freezes your address? Read the terms on asset protection and dispute handling.
• How will you track tax basis? Exchanges may report proceeds on Form 1099-DA. Your own records still have to support your basis.

None of these questions has a single right answer. They decide whether the “one ounce” in the marketing is the same “one ounce” you think you are buying.

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