RWA does not equal real assets! Looking at the asset on-chain risks from the depeg of PAXG.

Recently, gold has been continuously soaring, but tokenized gold has encountered depeg and liquidation issues, raising doubts about whether the so-called real world assets (RWA) can truly represent real assets. Once assets are on-chain, what problems and risks may arise?

What is tokenization gold PAXG?

The principle of tokenization of gold is similar to that of stablecoins, with its price linked to gold. It provides investors with another way to invest in gold, without having to pay ETF management fees or bear the storage costs and carrying risks of physical gold bars. Currently, the largest issuers of tokenized gold are stablecoin issuers Paxos and Tether.

Taking Paxos' PAXG as an example, each PAXG is backed by one troy ounce ( of gold, abbreviated as TOZ, with 1 troy ounce approximately equal to 31.1 grams). The gold is stored in the London LBMA ( London Bullion Market Association, an over-the-counter market supervised by the Bank of England, and is also the world's largest gold over-the-counter trading center). The minimum trading unit is 0.01 TOZ, which means that with the current gold price of 4300 USD, about 43 USD is needed to invest in PAXG. Both redemption and creation can be done in USD and gold, which also means that investors can engage in pure price investment ( trading settled in USD to earn price differences), or normally store it as digital assets, but convert it back to physical gold when needed.

PAXG is depegged from the spot price of gold, RWA does not equal real assets!

However, while the tokenization of gold assets on the blockchain is taking place, it has also sparked numerous issues, especially during the recent significant market fluctuations. The depeg of PAXG's price and the resulting leveraged liquidations have left investors furious.

On 10/11, the crypto world experienced a sudden crash, with PAXG plunging 22%, while physical gold is currently on a market break.

On October 11, 2025, the “Lightning Crash” swept through the cryptocurrency market, impacting the gold-backed token PAXG the most, with its spot price on Binance plummeting by 22% in an instant, triggering a wave of liquidations. This incident not only exposed the vulnerabilities of RWA trading but also raised user outrage due to suspected interface malfunctions on the Binance platform, prompting the community to call for regulatory intervention.

( Gold has reached new highs repeatedly, but PAXG has crashed, triggering liquidation? The community calls for regulatory investigation ).

On 10/16, the spot price of gold reached a new high, with PAXG trading at a premium of up to 10%.

Gold reached a new historical high on 10/16, with gold spot (XAU) soaring to 4,380 USD at one point, while the highest price for PAXG in spot trading on Binance reached 4,790 USD, and perpetual contracts surged to 5,106 USD, resulting in a premium over physical gold of 9.4% and 16.6%.

Why RWA is not equal to real assets?

PAXG currently has a market capitalization of 1.37 billion USD, while the tokenized gold XAUT issued by Tether has a market capitalization of 1.07 billion USD. The world's largest gold ETF is the SPDR Gold Trust (GLD), which has total managed assets of up to 139.8 billion USD. In terms of volume, the scale of the two tokenized golds is only 1.7% of that of one ETF.

Gold is a safe-haven asset, but after being put on the blockchain, it has become a speculative tool.

Gold is typically viewed as a safe-haven asset by traditional investors, and major central banks around the world have long used gold as reserves, usually not buying and selling frequently, but holding it for the long term.

However, once the tokenization is on the chain, trading becomes easier and friction costs are lower, making it a speculative tool for many, with leverage as high as 50 to 75 times. Of course, investors may also argue that they are optimistic about gold in the long term and believe that gold's volatility is lower compared to cryptocurrency, so they can confidently open high leverage to increase investment returns.

On-chain asset prices are pegged to real assets, but traditional finance is closed on weekends.

Traditional financial markets have set opening hours, even the foreign exchange market, which trades 24 hours a day, will have a break for currencies like the US dollar and other G7 international currencies after the US market closes on Friday, and will resume pricing and liquidity during Sydney's working hours on Monday.

However, RWA has always touted the advantage of being open 24/7 year-round, but this time it encountered a situation where the gold spot and futures market was closed, exacerbating the liquidity crisis.

This reminds the author of the past Lunar New Year holidays in Taiwan, when the international foreign exchange market still operated as usual, and there were several instances of significant fluctuations in the Japanese yen exchange rate. However, some banks still provided online banking quotes, allowing the public to use online banking for foreign exchange arbitrage. Fortunately, online banking has a limit on the transaction amount, and these banks could only accept their losses. This is precisely the problem that easily arises when the market trading hours do not align. Of course, banks or market makers can avoid the risk of market gaps by widening the bid-ask spread, but it is difficult to avoid losses in extreme market conditions.

In extreme markets, traditional finance may also experience depeg situations.

In fact, there are also similar cases of asset depeg occurring in traditional financial markets. For example, in February of this year, due to the uncertainty of Trump's 2.0 tariffs, gold spot and futures prices showed a price difference. When there is a profit to be made from the price difference, relevant operators also attempt to arbitrage, causing the price difference to gradually converge. At that time, the depeg situation of gold led to an unusual amount of gold bars and silver bars being flown from London and other places to New York, creating a remarkable spectacle.

(Concerns over Trump's tariffs have led to a new high in gold prices, with large amounts of gold bars and silver bars being shipped to the United States ).

Liquidity and Slippage Risk in the Cryptocurrency Market

In addition, the cryptocurrency market has limited depth, and with a high proportion of users using high leverage, PAXG resembles “crypto stocks” more than a stable asset. Even as an asset token named after gold, its daily price fluctuations are higher than those of gold spot and futures.

Last Friday's extreme situation clearly showed that market makers were unable to cope with market liquidity in the short term, and the panic sentiment in the crypto space spreads more easily, further highlighting the liquidity and slippage risks in the market.

Crypto convenience tax? Exchange high volatility for convenience.

We can also describe on-chain assets like PAXG and XAUT as “digital mirror gold,” providing convenient 24/7 trading and fractional ownership, but they are essentially derivatives rather than physical assets and cannot fully replicate the stability of traditional assets. Although PAXG and XAUT both claim to have a 1:1 gold reserve, it is clear that spot trading on exchanges is primarily provided by market makers, not to mention leveraged perpetual contracts, which are essentially derivative products.

This recent depeg further highlights the “convenience tax” of crypto, where higher volatility is exchanged for convenience. If investors want to pursue pure gold holdings, traditional assets may be more reliable!

This article RWA does not equal real assets! Looking at asset on-chain risks through the depeg of PAXG first appeared in Chain News ABMedia.