What Are the Security Risks and Vulnerabilities of PAX Gold (PAXG)?

Smart contract vulnerabilities pose risks to PAXG token security

Smart contract vulnerabilities can significantly impact the security of PAXG tokens, potentially leading to theft or manipulation of assets. Access control flaws, for instance, have caused substantial financial losses in smart contracts, amounting to $953.2 million in 2024 alone. To address these risks, Paxos has taken proactive measures by having PAXG formally verified by CertiK, a leading blockchain security firm. This verification process involved a comprehensive examination using CertiK's Formal Verification Platform, Static Analysis, and Manual Review techniques.

The security of PAXG is further enhanced by its backing of physical gold reserves stored in London Bullion Market Association (LBMA) vaults. This backing provides an additional layer of protection against potential smart contract vulnerabilities. However, it's crucial to note that while physical backing offers security, the digital representation of these assets through smart contracts still poses potential risks.

Investors and users of PAXG should remain vigilant and stay informed about the ongoing efforts to maintain and improve the security of the token's smart contracts. Regular audits and continuous monitoring are essential to mitigate potential vulnerabilities and ensure the long-term stability of PAXG.

Centralized dependence on Paxos Trust Company creates potential single point of failure

PAX Gold's reliance on Paxos Trust Company for custody and management of the underlying gold creates a significant centralization risk. This single point of failure could potentially jeopardize the entire PAXG ecosystem if Paxos were to face operational issues or regulatory challenges. Recent incidents highlight these concerns. For instance, in 2023, Paxos experienced an internal technical failure that led to the mistaken minting of 300 trillion PYUSD tokens. While quickly resolved, this event underscores the vulnerability of centralized systems to human error and technical glitches.

The table below illustrates key risks associated with PAXG's centralized model:

Despite these risks, Paxos' regulatory compliance and oversight by the New York Department of Financial Services (NYDFS) provide some security assurances. The company undergoes regular audits and maintains transparency reports to verify the 1:1 backing of PAXG tokens with physical gold. Additionally, the underlying gold bars are insured against loss or damage, offering an extra layer of protection for token holders. However, investors should remain aware that the centralized nature of PAXG inherently introduces vulnerabilities that decentralized alternatives may mitigate.

Regulatory challenges and market manipulation incidents affect PAXG stability

PAX Gold (PAXG) has faced regulatory scrutiny and market manipulation concerns since its launch. In the United States, the Securities and Exchange Commission (SEC) has investigated potential securities law violations related to tokenized commodities. While no specific delisting of PAXG was mandated, regulatory compliance concerns persist. The European Union's Markets in Crypto-Assets (MiCA) regulation is likely to classify PAXG as an "asset-referenced token," requiring additional oversight and compliance measures.

Market manipulation allegations have also surfaced in the tokenized gold market. To illustrate the impact of these challenges on PAXG's stability, consider the following price deviations from spot gold:

These significant price deviations suggest potential market manipulation or liquidity issues. Furthermore, the 24-hour trading volume of PAXG fluctuated dramatically, ranging from $19.804 million to $2.92 billion between September and October 2025, indicating possible market irregularities. These regulatory challenges and market manipulation incidents have contributed to PAXG's volatility, potentially undermining its role as a stable, gold-backed digital asset.

FAQ

What is paxg coin?

PAXG is a cryptocurrency backed by physical gold. Each token represents 1 troy ounce of gold, allowing users to own and trade gold digitally.

Is Pax gold a good investment?

Yes, Pax Gold can be a good investment. It offers exposure to gold's stability and potential for value appreciation, while providing the convenience of digital assets.

What is the future of PAXG?

PAXG's future looks promising, with potential resistance levels at $3,700-$3,750. Technical analysis indicates a neutral outlook, suggesting stability and gradual growth potential for this gold-backed cryptocurrency.

What is the all time high for Paxg?

The all-time high for Paxg is $4,201, which was recently reached. It's currently trading around $4,178, close to its peak.