Paxos wins SEC clearance for blockchain settlement role

Paxos Securities Settlement Company has received clearing agency registration from the U.S. Securities and Exchange Commission, making it the only blockchain-native firm registered by the regulator to provide clearing and settlement services as a central securities depository in the United States.

The registration, granted to the Paxos subsidiary under Section 17A of the Securities Exchange Act of 1934, allows it to provide clearing and settlement services for transactions in eligible securities. It follows several years of work with the regulator and expands the group's role in post-trade market infrastructure.

Clearing agencies sit at the centre of securities markets, helping complete trades after execution. They manage the transfer of securities and cash between counterparties and play a key role in reducing operational and counterparty risk.

Paxos said the decision builds on live work that began in early 2020 under SEC no-action relief. During that period, it cleared and settled U.S. equities daily with participation from large financial institutions, testing blockchain technology in a regulated post-trade environment.

Those operations showed that blockchain-based post-trade infrastructure could support same-day settlement while cutting costs and improving operations, according to the company. In many equity markets, traditional settlement has long involved delays between trade execution and final completion, exposing participants to risk and tying up capital.

That has made post-trade reform an area of continued interest for market operators, brokers and regulators. Supporters of distributed ledger systems argue that shared digital records can simplify reconciliation and shorten settlement cycles, though regulators have generally taken a cautious approach to bringing such systems into core market structure.

Charles Cascarilla, Chief Executive Officer and Co-Founder of Paxos, linked the registration to the company's long engagement with the SEC.

"Our clearing agency registration is the result of seven years of work with the SEC, beginning with our No-Action Letter in 2019 and the settlement pilot we operated with some of the world's largest and most sophisticated financial institutions," said Charles Cascarilla, Chief Executive Officer and Co-Founder of Paxos.

He said the registration allows the company to provide clearing and settlement services for transactions in eligible securities.

"As a registered clearing agency, PSSC is able to provide clearing and settlement services for transactions in eligible securities. Most importantly, it allows us to offer the most complete infrastructure for our partners to continue evolving with the market and blockchain technology," Cascarilla said.

Broader push

The registration adds to Paxos's existing regulatory footprint across several jurisdictions. It said it is regulated by the Office of the Comptroller of the Currency in the United States, by FIN-FSA in Europe and by the Monetary Authority of Singapore through affiliated entities.

Paxos is best known for its work in digital assets, tokenisation and stablecoins. It has also worked with large financial and payments groups including PayPal, Interactive Brokers, Mastercard and Mercado Libre, according to the company.

The business has raised more than USD $500 million from investors including Oak HC/FT, Declaration Partners, Founders Fund and PayPal Ventures. Its products include PayPal USD, Global Dollar and Pax Gold.

Market structure

The SEC decision is notable because registered clearing agencies occupy a tightly regulated part of U.S. financial market infrastructure. Entry into that category gives Paxos a formal role in a market function historically dominated by established incumbents rather than digital asset specialists.

It also comes as parts of the financial industry continue to examine whether blockchain-based systems can move beyond niche digital asset use cases into mainstream securities processing. While enthusiasm around tokenisation has grown, much of the debate has centred on how far existing rules, operational standards and market practices can adapt to new ledger-based models.

For Paxos, the registration provides regulatory standing to expand from pilot activity into a more permanent structure for eligible securities transactions. Its settlement work has already operated in a live environment with major institutions, a point likely to matter as market participants weigh whether to adopt new post-trade arrangements.

The approval also underscores how regulators are beginning to distinguish between speculative crypto activity and the use of distributed ledger technology in established areas of financial infrastructure. In this case, the SEC has allowed a blockchain-native group into the clearing agency framework rather than creating a separate regime outside the existing market structure.

Paxos said the registration followed seven years of work with the SEC, beginning with its No-Action Letter in 2019 and continuing through the equities settlement pilot with large financial institutions.