Tokenized gold: PAXG and the MiCA gap in the EU
RWA Signal Insight
CommoditiesCoinbase is ending support for 14 tokens, including the gold-backed PAXG, for retail customers in the European Economic Area by October 30, 2024. This forced delisting occurs because PAXG is classified as an Asset-Referenced Token (ART) under the EU's Markets in Crypto-Assets (MiCA) regulation, which requires specific authorization that no issuer has yet obtained. Any PAXG remaining on the platform after the deadline will be automatically converted into USDC, effectively forcing holders out of their gold-backed positions. This regulatory bottleneck highlights a significant friction point for RWA adoption, as gold tokens like PAXG and Tether Gold represent a combined market capitalization of approximately $5.1 billion. While Paxos is authorized in the EU for other products, the specific regulatory requirements for ARTs remain unmet, forcing compliant exchanges to drop support. The situation underscores the challenges of applying rigid financial frameworks to decentralized assets, as the European Commission now debates potential adjustments to MiCA. Ultimately, this event demonstrates how regulatory compliance can disrupt the accessibility of tokenized commodities for European retail investors.
Key points
- Coinbase will delist PAXG and 13 other tokens in the EEA by October 30.
- MiCA classifies gold tokens as Asset-Referenced Tokens, requiring currently non-existent EU authorization.
- PAXG and Tether Gold represent approximately $5.1 billion in combined market capitalization.
- Remaining PAXG balances will be automatically converted to USDC by the exchange.
Background
PAX Gold (PAXG) is an Ethereum-based token where each unit represents one troy ounce of physical gold stored in London Bullion Market Association-approved vaults. It allows investors to gain exposure to gold with the divisibility and liquidity of a digital asset, while maintaining ownership rights to the underlying physical bullion. The asset is managed by Paxos Trust Company, a regulated US trust institution.