Paxos Gold (PAXG)

Rejected venues wait the longest for re-review; a rejection has to earn another look before the scheduled date.

REJECTED ON A RECENT AML ENFORCEMENT ACTION AND A DEMONSTRATED STRESS-EVENT PEG FAILURE, NOT ON CUSTODY QUALITY. PAXG has the strongest institutional issuer profile of the two gold tokens in this backlog: Paxos Trust Company converted its NYDFS limited-purpose trust charter to a federal OCC national trust charter, completed 2025-12-12, and reserves are attested monthly (KPMG as of the February 2025 report, succeeding Withum) against allocated LBMA Good Delivery gold. That quality is exactly why the two adverse findings carry weight rather than reading as generic risk. First, NYDFS fined Paxos $26.5M on 2025-08-07 and ordered roughly $22M of AML remediation after finding Paxos failed to independently verify Binance’s AML claims across $1.6B of flagged transactions during their former partnership — a compliance failure inside the last twelve months, not a stale legacy matter. Second, PAXG itself decoupled from spot gold by roughly 22% intraday on Binance on 2025-10-11, then overshot 8-16% the other direction on 2025-10-17, because PAXG’s KYC-gated, high-minimum redemption arbitrage could not correct the dislocation the way a liquid ETF’s creation/redemption mechanism would. That is a structural weakness that persists into any future stress event, not a one-off.

Kill criteria: the events that revoke this verdict
• Twelve consecutive months with no material AML or compliance enforcement action against Paxos
• PAXG holds a spot-gold peg within normal ETF-like tolerance through a subsequent market-stress event
• A direct or materially faster and cheaper redemption-arbitrage path becomes available to close the stress-event gap
• Monthly reserve attestation continues without a lapse in cadence or attestor independence

The research file

Mechanism and custody

Each PAXG token is redeemable for one fine troy ounce of gold from an allocated, segregated London Good Delivery bar held in LBMA-accredited vaults in London. Paxos advertises zero storage fees and zero on-chain transfer fees for holding or moving PAXG. Secondary sources name Brink’s as the vault operator; Paxos’s own fetched page described only ”professional vault facilities” without naming the operator directly, so the Brink’s attribution is treated as plausible but not independently confirmed from a primary Paxos source.

Issuer and regulatory status

Paxos Trust Company held a NYDFS limited-purpose trust charter (granted 2015, the first in New York for a digital-asset trust) until it completed conversion to a federally regulated OCC national trust charter on 2025-12-12, moving primary supervision from NYDFS to the Office of the Comptroller of the Currency. Paxos’s smart contracts (used on both BUSD historically and PAXG) include an ”assetProtectionRole” that can freeze, unfreeze, and wipe the balance of any address, publicly checkable through an on-chain isFrozen function. On 2022-11-12, at the direction of US federal law enforcement, Paxos froze 11,184.38 PAXG (about $19M) across four addresses tied to funds drained from FTX during its collapse, later burned — a confirmed exercise of that freeze power on PAXG specifically, in this case in the client’s interest rather than against it.

The 2025 NYDFS AML enforcement action

NYDFS ordered Paxos to pay a $26.5M civil penalty on 2025-08-07 and to commit roughly $22M to AML compliance remediation. The consent order found Paxos failed to independently verify anti-money-laundering claims made by Binance during their former partnership, and identified $1.6B in transactions linked to sanctioned individuals, darknet markets, and Ponzi schemes that flowed through that relationship without adequate Paxos-side controls. This is an entity-level compliance failure at the issuer, not a PAXG-specific gold-backing defect, but it lands inside the twelve months preceding this review and speaks directly to the operational trust this registry requires of a custodial issuer.

The October 2025 depeg

PAXG fell roughly 22%, from about $3,950 to $3,087, intraday on Binance on 2025-10-11 — far outside gold’s normal roughly 2% daily volatility — triggering large liquidations of leveraged, PAXG-collateralized positions. On 2025-10-17 it spiked the opposite direction, briefly touching roughly $5,106 on Binance perpetuals against a spot print near $4,790, an 8-16% overshoot. Reporting attributes the root cause to PAXG’s redemption-arbitrage path being too slow and expensive (KYC-gated, 430-token minimum for a full bar) to correct the price dislocation in real time, compounded by PAXG’s use as leveraged exchange collateral. These figures come from blog and newsletter sources rather than a primary Paxos or Binance post-mortem, so the exact magnitude should be treated as approximate, but the direction and mechanism are consistent across independent write-ups.

Redemption terms and comparison

Only fully KYC-verified Paxos customers can redeem; a retail or advisor holder who is not a Paxos account holder cannot redeem on-chain and must sell on the secondary market instead — the same access limitation every wrapped-asset comparator in this registry carries. Against XAUT, PAXG is the stronger issuer on every disclosed axis: a named third-party vault versus an undisclosed related-party custodian, monthly versus quarterly attestation, and a US federal trust charter versus a light-touch El Salvador regulator. That comparison is why this rejection rests on the two adverse findings above rather than on structural custody quality. Against a physical gold ETF, both PAXG and XAUT share the same freeze-risk axis a bank-custodied, exchange-listed ETF does not carry, and the October 2025 event shows the redemption-arbitrage loop is materially slower than an ETF’s creation/redemption mechanism under stress.

Sources

The claims above trace to these. Where a number could not be independently verified, the thesis says so.

• Paxos — PAX Gold product page · primary · accessed 2026-08-17
  Supports: mechanism, redemption path, fee structure
• Paxos — PAXG transparency and attestation reports · primary · accessed 2026-08-17
  Supports: monthly attestation cadence, KPMG as current attestor
• NYDFS — consent order against Paxos Trust Company · primary · accessed 2026-08-17
  Supports: $26.5M penalty, AML compliance failure, $1.6B flagged transactions, Binance relationship
• Skadden — Paxos receives approval to convert to OCC national trust · secondary · accessed 2026-08-17
  Supports: NYDFS to OCC charter conversion, completion date
• Paxos — PAXG freeze of FTX-linked addresses · primary · accessed 2026-08-17
  Supports: confirmed on-chain freeze power exercised on PAXG, law-enforcement direction
• ANT Labs — the PAX Gold de-peg writeup · secondary · accessed 2026-08-17
  Supports: October 2025 depeg magnitude, redemption-arbitrage friction as root cause

Inherited controls

The verdict above grades the protocol layer. Every position also inherits the asset it holds and the chain it settles on. The least safe layer sets the position’s grade, and the position table names which one that is.