Blockchain startup Paxos announced Monday that it is launching a stablecoin with regulatory backing from the state of New York.
The newly minted Paxos Standard, which has been approved and will be regulated by the New York Department of Financial Services (NYDFS) is fully backed by the U.S. dollar, the company said. Notably, Paxos is already a qualified custodian, meaning it is legally regulated and approved by the U.S. Securities and Exchange Commission to hold client funds.
The Paxos Standard token is designed to provide liquidity for investors trading in crypto assets by providing a “digital alternative to cash” that can still see instant transaction settlements, according to the company.
Paxos CEO and co-founder Charles Cascarilla said in a statement that the new stablecoin aims to provide financial markets with the ability to conduct transactions by way of a “fully USD-collateralized asset” that leverages blockchain technology.
Calling the new token a “significant advancement in digital assets,” Cascarilla said:
“In the current marketplace, the biggest hindrances to digital asset adoption is trust and volatility. As a regulated trust with a 1:1 dollar-collateralized stablecoin, we believe we are offering an asset that improves on the utility of money.”
Built based on ethereum’s ERC-20 standard, the stablecoin can be sent between any two wallets on the ethereum network, although the release noted that only verified Paxos customers can purchase or redeem tokens on the company’s website. To maintain the stablecoin’s value, tokens are destroyed when they are redeemed, while tokens still in circulation will be backed by dollars held in in the firm’s custody.
As part of its services, any investors who trade using Paxos’ itBit exchange or over-the-counter trading desk can immediately cash their cryptocurrency holdings out using Paxos Standard. The token will also be listed on other exchanges with the ticker symbol PAX.
The company has previously received regulatory approvals through the NYDFS, and currently operates under a limited-purpose trust company charter.
U.S. dollars image via Shutterstock