- Paxos Labs has launched PAXGy, a token backed by PAXG that can grow in gold value over time rather than paying out a separate yield.
- Underlying reserves are deployed to vetted institutional borrowers through the gold-leasing market, with returns accruing through the PAXGy exchange rate.
- PAXGy is live across OKX, X Layer, Uniswap, 0x, Ether.Fi and Chainlink, but Paxos Labs warns the return is not guaranteed.
- Paxos Labs says tokenized gold has grown beyond $5 billion in total value, with Q1 2026 trading volume exceeding all of 2025.
- Gold trades near $4,321.2 an ounce, up 0.54% on the day, while Ethereum sits at $2,684.43.
Paxos Labs has introduced PAXGy, a tokenized gold product that is backed by PAXG but designed to increase in value relative to gold over time. The structure marks a departure from the standard model of tokenized bullion, where each token simply tracks the spot price of the metal. Instead of paying holders a separate yield, PAXGy aims to make each token redeemable for progressively more PAXG.
How The Token Works
PAXG represents physical gold held in institutional custody, with the underlying reserves subject to regular attestation. PAXGy adds a layer on top of that base. According to Paxos Labs, holders can deposit PAXG or swap supported stablecoins for PAXGy. The reserves backing the token can then be lent to vetted institutional borrowers in the bullion market. When those strategies generate a return, the value accrues through the PAXGy exchange rate. The holder’s token count does not have to increase. Rather, each PAXGy can become redeemable for more PAXG over time. That is a fundamentally different proposition from holding tokenized bullion, which offers direct price exposure but no mechanism for the metal itself to earn a return. The product is launching with support from OKX, X Layer, 0x, Uniswap, Ether.Fi and Chainlink. That distribution footprint places PAXGy across centralized exchange, decentralized exchange and DeFi lending venues from the outset, giving holders multiple routes to acquire or deploy the token.
Yield Comes With Added Risk
Paxos Labs is explicit that there is no free yield here. Deploying gold into external strategies introduces credit, liquidity and market risks. If borrowers default or the underlying strategies suffer losses, the PAXGy exchange rate can move downward. Growth is not guaranteed. That distinction matters because PAXG and PAXGy may sound nearly identical while carrying different risk profiles. PAXG is designed around direct exposure to physical gold. PAXGy layers a yield-generating strategy on top of that exposure, meaning holders take on counterparty exposure to the lending market in exchange for the possibility of earning more gold. The gold-leasing market is long established, with bullion banks and institutional holders historically lending metal to borrowers in return for a lease rate. Tokenization extends that function to onchain participants, but it does not eliminate the underlying credit dynamics. A lease is still a loan, and loans can go bad.
A Larger Tokenization Trend
Paxos Labs says tokenized gold has now grown beyond $5 billion in total value, while trading volume during the first quarter of 2026 exceeded the whole of 2025. Those figures suggest the market has moved past the proof-of-concept stage and into a phase where participants are looking for ways to make tokenized assets financially productive. PAXGy is an attempt to serve that demand. Instead of tokenizing gold simply so it can move onchain, the product tries to connect it to a centuries-old lending market as well. It is another example of tokenization starting to recreate financial functions around an asset, not merely digitize ownership of it. The broader market backdrop remains mixed. Gold is trading near $4,321.2 an ounce, up 0.54% on the day, while Ethereum is at $2,684.43, down 0.11%. For a product that bridges a traditional commodity market and onchain infrastructure, both price levels are relevant reference points. Whether PAXGy attracts meaningful deposits will depend on how investors weigh the incremental return against the incremental risk. Plain PAXG offers simplicity and direct metal exposure. PAXGy offers the prospect of a growing gold balance, but only if the lending strategies behind it perform as intended. Paxos Labs has made clear which of those two outcomes is guaranteed, and which is not.
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