Summary: When diving into gold-backed cryptocurrencies, it is important to prioritize assets that offer a transparent 1:1 backing with authentic 400 oz London Good Delivery gold bars. These tokens should consistently align with the market XAU price. Selecting such tokens not only ensures secure custody but also allows you to leverage the inherent stability of gold on-chain.
To guide your journey, our analysts have closely analyzed and curated a list of the top three gold-backed crypto assets worth your consideration. Here's an overview of the most reputable tokenized gold options available on the market:
Best Gold Backed Cryptocurrency
In our exploration to spotlight the leading gold-backed cryptocurrencies, we've examined more than 10 tokenized gold assets. We evaluated critical aspects like the strength of the asset's gold reserve, security features, liquidity, and regulatory compliance. As a result, we've identified three standout cryptocurrencies, each substantiated by a real backing of physical gold. These selections serve as key financial instruments for wise investors seeking to diversify their portfolios in the ever-changing landscape of digital assets.
1. Pax Gold (PAXG)
Pax Gold (PAXG) stands as the premier gold-backed cryptocurrency, offering a seamless blend of the intrinsic value of physical gold and the versatility of digital assets. Built on the Ethereum blockchain, each PAXG token is an ERC-20 token equivalent to one fine troy ounce of a London Good Delivery gold bar, securely stored in LBMA vaults. This makes it a compelling store of value and an efficient hedging instrument, accessible via any Ethereum-compatible wallet.
Managed by the New York State Department of Financial Services-regulated Paxos Trust Company, PAXG sets itself apart with its low-cost structure, zero storage fees, and instantaneous settlement features. It offers unique advantages like being the only gold token redeemable for LBMA-accredited gold bullion bars. Moreover, its transparent audit and custody protocols ensure investor confidence, making PAXG the gold standard in gold-backed digital assets.
2. Tether Gold (XAUT)
Tether Gold (XAUT) stands as the second-best choice for a gold-backed cryptocurrency, issued by the less-regulated Tether Limited. Each token is backed by physical gold stored in secure, global vaults. Unlike its top competitor Pax Gold, XAUT is DeFi-compatible, allowing for yield farming on various platforms.
The token is highly liquid and trades 24/7, offering features like easy divisibility and redemption for physical gold in Switzerland. A one-time 25 basis point fee for purchase or redemption adds to its appeal, making it a versatile option for investors interested in combining the stability of gold with the flexibility of digital assets.
3. Kinesis Gold (KAU)
As the third-best option, Kinesis Gold (KAU) offers a unique approach to gold-backed cryptocurrency. Each KAU token is backed by one gram of physical gold, stored in secure, audited vaults. Unlike other platforms, Kinesis provides a yield system, rewarding users for various activities like holding and spending gold, which makes it a multi-functional asset.
The platform was founded by the Allocated Bullion Exchange (ABX), adding a layer of credibility. However, its multi-tiered yield system could be complex for those looking for a straightforward gold-backed investment. Kinesis offers spending capabilities and international transfers, but these features may not be necessary for investors solely interested in gold as a store of value.
How to Buy Gold-Backed Cryptocurrencies
For those interested in acquiring gold-backed cryptocurrencies like Pax Gold (PAXG), a secure and reputable platform is essential. Uphold stands out for its regulatory compliance, extensive asset support, and competitive fee structure. Not only does it support PAXG, but it also offers over 250 other crypto assets and over 30 fiat currencies, including USD, EUR, AUD, GBP, CHF, and more.
To start your investment in PAXG, follow these easy steps:
- Register for an account on Uphold and complete any required verification.
- Navigate to 'My Banks' and link your bank account, selecting from multiple supported currencies.
- Fund your Uphold account with your chosen currency.
- Utilize these funds to instantly purchase PAXG or other available assets.
By following this process on Uphold, diversifying your portfolio with gold-backed assets like PAXG becomes a secure and straightforward task.
How Tokenized Gold is Regulated
The regulation of gold tokens varies depending on the issuer and jurisdiction, each having its own set of laws and requirements. Factors such as security standards, audits, and compliance with AML and KYC regulations can differ widely.
For instance, Pax Gold (PAXG) offers a high level of regulatory compliance. Issued by the Paxos Trust Company, it is regulated by the New York State Department of Financial Services. This level of oversight ensures regular audits and stringent compliance measures, making PAXG a preferred choice for investors seeking a secure gold-backed token.
Can I Earn Yield with Gold Tokens?
Yes, you can generate yield on your gold-backed PAXG tokens through DeFi platforms, most commonly by supplying liquidity to decentralized exchanges such as Uniswap. You can participate in liquidity pools like PAXG-WETH or PAXG-USDC and earn an annual yield, sometimes reaching up to 5% APY.
It's crucial to be mindful of the risk of impermanent loss, especially in a pool like PAXG-WETH. If the price of gold rises, the pool will automatically rebalance, leaving you with a greater proportion of Ethereum compared to PAXG, and vice versa if the price of gold declines. This rebalancing can lead to impermanent loss, which you should consider when assessing the risks and rewards of liquidity provision.
In an evolving digital asset landscape, gold-backed cryptocurrencies present a unique blend of the timeless value of gold and the flexibility of crypto. Our deep dive into over 10 tokenized gold assets has spotlighted Pax Gold (PAXG), Tether Gold (XAUT), and Kinesis Gold (KAU) as standout options, each underpinned by tangible gold reserves. With varying features and benefits, these tokens cater to diverse investor needs, offering both stability and opportunity in the digital realm. As with all investments, it's imperative to conduct thorough research and prioritize tokens that emphasize transparency, security, and regulatory compliance.