Paxos Gets SEC Nod to Settle U.S. Securities on Blockchain

Paxos on Friday became the first blockchain-native firm registered by the U.S. Securities and Exchange Commission to operate as a clearing agency and central securities depository, allowing it to clear and settle U.S. securities on a blockchain with same-day or near-instant finality.

The SEC granted registration to Paxos Securities Settlement Company (PSSC), authorizing it to provide clearing and settlement services for transactions in eligible securities. PSSC will operate alongside existing industry infrastructure such as the Depository Trust & Clearing Corporation while using blockchain systems to record and settle trades. Paxos has provided similar services to participating financial institutions since 2020 under the SEC’s no-action relief.

Paxos has been running daily clearing and settlement of U.S. equities with participating banks and broker-dealers as part of a test program. The firm says those tests showed faster settlement, lower costs and improved operational efficiency within a regulated framework. With SEC registration, PSSC can offer those services to a wider set of market participants and allow eligible securities to settle on the same day or nearly instantly instead of following a traditional multi-day cycle.

Clearing agencies match, confirm and guarantee trade details between buyers and sellers. Central securities depositories keep records of ownership and facilitate transfers. By combining those functions with distributed ledger technology, Paxos plans to reduce the time between trade execution and final settlement.

Paxos is also a stablecoin issuer. The company and its partners will determine which securities qualify as eligible for blockchain-based settlement under the new registration.

Charles Cascarilla, Paxos chief executive, issued a statement that “As a registered clearing agency, PSSC is able to provide clearing and settlement services for transactions in eligible securities.” He added the registration allows the company to offer infrastructure for partners to use blockchain technology in post-trade processing.