Key Takeaways:
- Paxos is registered as a clearing agency with the SEC in the U.S.
- The company is the first blockchain native firm that received permission to operate as a regulated securities settlement firm.
- Paxos says its blockchain capabilities could facilitate quicker settlement and increased cost savings for financial institutions.
Paxos has made a significant stride in bridging the gap between the world of crypto and traditional finance. Its subsidiary, Paxos Securities Settlement Company (PSSC), was granted a registration by the U.S. Securities and Exchange Commission (SEC) as a clearing agency, now enabling the company to officially provide clearing and settlement services to eligible securities transactions.
The granting of the approval confers an immediate position at the foundational level of U.S. capital markets and represents one of the unambiguous city-to-date indications that blockchain technology is seeping deeper and deeper into regulated finances.
Paxos Enters the Heart of US Market Infrastructure
Now PSSC is the first and only blockchain-based clearing agency to be registered with the SEC under Section 17A of the Securities Exchange Act of 1934.
Security clearance firms are responsible for finalizing the trades of securities after they have actually been executed. They coordinate with buyers and sellers when deals get settled, ownership is passed and transactions are facilitated. Traditional markets still depend heavily on legacy infrastructure, and may take up to one business day to resolve.
Paxos believes blockchain rails can modernize that system. The company said its regulated blockchain infrastructure already demonstrated same-day settlement capabilities during a multi-year pilot program conducted with major financial institutions.
SEC Approval Follows Years of Regulatory Work
In 2019, SEC granted Paxos the first no-action relief to conduct test runs for a blockchain-based settlement platform for U.S. equities. The pilot started in February 2020, and was based in several major institutional players.
Read More: SEC’s Tokenized Stocks Push Could Shake Trillion-Dollar Exchanges, Research Warns
Blockchain Settlement Gains Institutional Momentum
Its platform minimised operational complexity and enhanced settlement speed and efficiency within a compliant regulatory framework during the test phase, Paxos said. Charles Cascarilla, CEO and co-founder, said the SEC approval was a result of seven years of dialogue with regulators and market participants.
That’s very important because tokens are getting popular on Wall Street, as are those stablecoins, and blockchain peacemakers keep emerging. Financial institutions are on the lookout for more than just a speculative market in crypto; they are investigating blockchain infrastructure to reduce settlement risk and cut costs.
Paxos Expands Its Crypto Infrastructure Business
On the other hand, the new registration further secures Paxos position in the maturing digital asset regulated infrastructure landscape. The Company already provides power to blockchain solutions for companies such as Paypal, Mastercard, Interactive Brokers and Mercado Libre.
Paxos has also launched a number of major digital assets, such as Global Dollar (USDG), PayPal USD (PYUSD), and Pax Gold (PAXG). Paxos now has SEC-regulated settlement infrastructure on its platform, and is looking to become a bridge between the old and new settlement markets and blockchain processes.
The approval could also speed up the institutional adoption of tokenized issuance and settlement models as different entities look for regulated approaches to turn to blockchain for capital markets solutions.
Read More: SEC Eyes Tokenized Stocks Plan That Could Unlock Trillions in Crypto Trading Markets
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