Gold is the world’s oldest and most established store of value. It’s the original stable currency, long before stable coins became a thing.
For many investors though, the disadvantage of gold is that you can’t earn interest on it and that it’s hard to loan out. The only official institution that offers interest on gold is the State Bank of India’s Gold Deposit Scheme, where the interest rates are as paltry as cash deposit rates.
With the rise of gold-backed cryptocurrencies, it’s now possible to earn interest on gold deposits. Holders of PAX Gold (PAXG) can earn interest by depositing at BlockFi. The Annual Percentage Yield (APY) is up to 3.25% (at the time of publishing), with interest paid out at the beginning of every month.
What is PAXG?
PAX Gold (PAXG) is the world’s largest gold-backed cryptocurrency by market cap. One PAXG token is backed by one fine troy ounce (t oz) of a 400 oz London Good Delivery gold bar, stored in Brink’s vaults. Holders of PAXG own the underlying physical gold, held in custody by Paxos Trust Company.
PAXG is built as an ERC-20 token on the Ethereum blockchain, so it can be moved or traded anywhere in the world, wherever ERC-20 tokens are supported.
What is BlockFi?
BlockFi is a non-bank financial company that offers interest-earning accounts, low-cost USD loans secured with cryptocurrency, and fee-free crypto trading. Accounts can be opened by individuals and businesses from all 50 U.S. states, and worldwide.
BlockFi is domiciled in the United States and regulated under US law. They’re backed by some of the biggest names in the industry, with more than $100 million in equity funding, and they currently have more than $2 billion in assets under management.
BlockFi offers cryptocurrency interest accounts, paying competitive interest rates on BTC and ETH, and on stable tokens such as USDC, Tether, and the gold-backed PAXG. Loans offered by BlockFi are secured with cryptocurrency collateral.
How to earn interest on gold
To get started you will need to buy PAXG. The easiest way to buy PAXG is at Binance (the world’s largest crypto exchange).
Once you are set up on Binance you can either transfer cryptocurrency (such as Bitcoin) to your account or deposit fiat currency directly into your account. Binance offers direct transfers from your bank account, avoiding fees associated with credit cards.
With your cryptocurrency balance, you can then trade it for PAXG, which can then be sent to your BlockFi account.
To open a BlockFi account you will need to prove your identity first, so this might take a couple of days.
Once your account is approved, log in to BlockFi and you will see the section
“Deposit crypto into your BlockFi account to start earning interest.”
[Check current rates at BlockFi.]
Click “Deposit PAXG”, and there you will be given a Blockfi PAXG wallet address (only send PAXG there, and not ETH or other tokens). You will need sufficient gas to send, and there is a vendor fee of 0.02% on every transfer.
Once that is set up you will be earning 2% (correct at the time of this post) on your gold-backed cryptocurrency deposit. Your tokens are not locked, so you can withdraw at any time, and you get one free withdrawal per month.
You can also buy PAXG within BlockFi by wiring USD to your BlockFi account. This will be converted into GUSD at a 1:1 ratio. If you are outside the US you would need to consider wire transfer fees. Once your account has GUSD it can be traded for PAXG. Gemini dollar (GUSD) is a regulated stablecoin pegged to and backed by US dollars held in reserve at State Street Bank and Trust Company.
Sign-up bonus: Get up to $250 in Bitcoin
Sign up to BlockFi using our referral link and get up to $250, paid out in BTC (terms & restrictions apply – see website for details).
This type of investment is not for everyone, especially as it goes against the grain why some people invest in gold and cryptocurrency in the first place.
For many gold investors, the whole point of gold is to be a secured store of value that can’t be seized or taxed.
And the same goes for crypto holders as well. Once your cryptocurrency leaves your hard wallet and onto an exchange, it’s exposed to the risk of being lost.
Also, BlockFi is not a bank so it doesn’t have the same guarantees as a bank. BlockFi is a custodian, so it is not insured by the FDIC or SIPC.
There is a real risk of losing your deposit, as has been shown with the experience with crypto lender Celsius freezing all account withdrawals (including PAXG).
If you are comfortable with having your cryptocurrency on an exchange in exchange for competitive interest rates, then consider depositing PAXG on BlockFi.
This post is written for information purposes only and is not financial advice. Quoted interest rates and sign-up bonuses were correct at the time of publishing. Goldscape is an affiliate of Binance and BlockFi.
As of February 14, 2022, the BlockFi Interest Account (BIA) is no longer available to new US clients. The BIAs have not been registered under the Securities Act of 1933 and may not be offered or sold in the United States, to U.S. persons, for the account or benefit of a U.S. person or in any jurisdiction in which such offer would be prohibited.