Post-trade blockchain startup Paxos has officially launched its settlement service that allows the firm to process transactions on select US-listed stocks between a limited number of broker-dealers.
Credit Suisse, Instinet, and Société Générale are the early adopters to use Paxos Settlement Service that enables any two parties to bilaterally settle securities trades directly with each other.
The announcement comes after Paxos received no-action relief to launch its blockchain-based settlement platform from the US Securities and Exchange Commission. A no-action letter means the regulators will not take enforcement actions against Paxos for its product, allowing the company to delve into the use of blockchain technology with broader applications outside the context of crypto space.
The move is also a landmark interaction between the mainstream finance and the blockchain space, as the SEC for the first time greenlights settling US equities outside the legacy infrastructure.
Paxos to roll out clearing agency
Paxos will be able to settle a limited number of liquid, large-cap stocks through its platform that operates on “a private and permissioned distributed ledger system that records changes in ownership of securities and cash resulting from settlement of securities transactions between participants.”
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The New York-based exchange and stablecoin issuer added it would continue to expand its settlement coverage to include all street-side broker-dealers and US-listed equities. In this context, it plans to seek the go-ahead from the SEC for its clearing agency later this year.
Paxos’ status as a licensed financial services company in the US allows it to potentially offer tokenized securities and also to access the traditional banking system.
Charles Cascarilla, Chief Executive Officer and Co-Founder of Paxos, stated, “Launching Paxos Settlement Service under No-Action relief is the first step in our journey to transform post-trade infrastructure in the securities industry. We’ve worked closely with Credit Suisse and Instinet to build a solution that can deliver long-term cost benefits and together we will refine the system in a live environment. Our upcoming application for clearing agency registration demonstrates our dedication to modernizing market structure on a large scale.”