What is Pax Gold?

The Pax Gold (PAXG) token is a gold-backed cryptocurrency launched by Paxos Trust Company (Paxos) in September 2019. Paxos states that each token in circulation is backed by one fine troy ounce (t oz) of a 400 oz London Good Delivery gold bar, stored in Brink’s vaults. According to Paxos, holders of PAXG tokens own physical gold held in custody by Paxos, and under certain circumstances PAXG holders may redeem their PAXG for the physical gold with Paxos. Since PAXG represents physical gold, its value is tied directly to its real-time market value.

The stated goal of Pax Gold was to increase the tradability of gold, which as a physical commodity is not easily divisible or flexible for transport.

How does PAXG compare to Bitcoin?

PAXG differs from Bitcoin in a few important ways.

First, Bitcoin is a “coin” and PAXG is a “token.” That is because Bitcoin powers the Bitcoin blockchain, and it is mined by a decentralized network of computers that solve complicated maths puzzles to verify transactions. By contrast, PAXG is a token that runs on the Ethereum blockchain. On Ethereum, ETH is the only coin that can be mined and miners mine ETH to process PAXG transactions. It is what is known as an ERC-20 token, the name applied to the generic token standard for the Ethereum blockchain.

Being an ERC-20 token has perks. Blockchains aren’t great at speaking to each other—you can’t get an Ethereum contract to work with a Bitcoin smart contract without some complicated engineering. However, it’s very easy for ERC-20 tokens to speak to one another, which means that PAXG can be used in most other decentralized finance applications.

In addition, unlike Bitcoin, PAXG represents a physical commodity (gold). While, like Bitcoin, PAXG can be used as a means of payment or a store of value, its market price should be determined by gold’s market value, which may be less volatile than the price of Bitcoin.

Finally, PAXG’s market capitalization is smaller than Bitcoin’s. As of June 2022, PAXG’s market capitalization was estimated to be $616 million, as compared to Bitcoin’s market capitalization of $576 billion.

Risk Statement

Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset. First and foremost:

No Canadian securities regulatory authority has expressed an opinion about PAXG, including an opinion that PAXG is not itself a security and/or derivative.

Wealthsimple has performed a legal assessment of PAXG prior to making it available on Wealthsimple Crypto and has concluded that PAXG is not and is unlikely to be deemed a security or derivative. However, there is a risk that this conclusion could change in the future and the impact of this on an asset’s value is outlined in our Product Disclosure.

We evaluated PAXG based on publicly available information, including (but not limited to):

• The creation, governance, usage and design of PAXG, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) that first created PAXG;
• The supply, demand, maturity, utility and liquidity of PAXG;
• Material technical risks associated with PAXG, including any code defects, security breaches and other threats concerning PAXG and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them; and
• Legal and regulatory risks associated with PAXG, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of PAXG.

Like all other crypto assets, there are some general risks to investing in PAXG. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Each of these risks are described in more detail in our in-app Product Disclosure.

Further to these general risks, Paxos Trust Company and other affiliated entities are not under any legal or regulatory obligation to disclose material information to the public regarding its activities. Holders of PAXG have no recourse to the Paxos Trust Company or Wealthsimple if PAXG declines in value for any reason.

Additionally, under PAXG’s terms of use, Paxos Trust Company reserves the right to charge storage fees to all PAXG token holders by issuing to itself new PAXG tokens, thereby diluting the value of existing PAXG tokens and passing on the storage fee to all PAXG token holders on a pro rata basis.

Wealthsimple Digital Assets Inc. (WDA) has prepared this Crypto Asset Statement based on publicly available information. Although WDA has taken steps to obtain information from apparently reliable sources, information contained in this Crypto Asset Statement may be inaccurate, incomplete or out-of-date. WDA emphasizes that this Crypto Asset Statement is not exhaustive of all risks associated with trading or staking SOL. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.

WDA is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Digital Assets Inc. dated June 18, 2021. Please be aware that the statutory rights of action for damages and the right of rescission in the securities legislation of each province and territory of Canada would not apply to a misrepresentation in this Statement.

 

Last updated: June 30, 2022