Paxos Granted SEC Green Light to Settle Equities on a Blockchain
Blockchain

Paxos Granted SEC Green Light to Settle Equities on a Blockchain

Last updated on

On October 28th 2019, the United States Securities and Exchange Commission (SEC) granted a no-action letter to Paxos Trust Company. Paxos is gearing up to settle equity securities using blockchain technology. The news marks the third no-action letter by the SEC this year.


Paxos No-Action Letter from the SEC Explained

Paxos’ no-action letter from the SEC will allow the firm to soon settle equities on a blockchain.

The company is creating a blockchain platform for broker-dealers, and two companies are already slotted to use the settlement service: Credit Suisse and Société Générale.

The two companies will leverage Paxos to settle securities trades directly between each other. The platform will be the first to receive the regulatory green light for such activity.

Paxos says regulatory compliance has been a priority for quite some time. The company has worked with the SEC for about 18 months, with the last 6 months aiming at the receipt of a no-action letter.

According to Melayna Ingram, Paxos’ Head of Securities Products,

“Paxos is using this no-action relief [as an] opportunity to launch this product [and] as a chance to both validate our understanding of the way that the product works and what the participants will need from us as well as the market appetite.”

Ingram says the new technology can revolutionize the current structure of equities settlement, “where there’s been nothing new for close to 50 years”.

Ingram continued,

“The front office and trading has had a ton of improvements in speed and the level of sophistication and the back office has largely gotten left by the wayside and so this is… a very meaningful step for the industry in… making the back office aligned with the front office and then ultimately driving a path for firms to perform digital transformation of their back office and operations.”

Société Générale, France’s third largest bank, has already emerged as a first adopter of blockchain technology. Earlier this year, the bank issued a €100 million covered bond as a security token on Ethereum.

With regard to utilizing the Paxos settlement service, Société Générale COO Jeffrey Rosen says “we will be able to tailor the system to our needs and introduce a technology that can positively impact our cost structure in both the immediate and long-term”.

Emmanuel Aidoo, head of digital assets markets for Credit Suisse, added,

“We believe the process of securities settlement can be greatly optimized using blockchain, and with Paxos Settlement Service we will benefit from these efficiencies first hand. We see this as a significant and important milestone in our Digital Asset Markets strategy and foresee opportunities to leverage this product across numerous asset classes in the future.”

Earlier this year, the SEC granted no-action letters for TurnKey Jet and Pocketful of Quarters.

What do you think about Paxos receiving a no-action letter from the SEC? Let us know what you think in the comments section below.


Image courtesy of Paxos.

October 30, 2019

About Author

Avatar

Tim Fries Tim Fries is the cofounder of The Tokenist. He has a B. Sc. in Mechanical Engineering from the University of Michigan, and an MBA from the University of Chicago Booth School of Business. Tim served as a Senior Associate on the investment team at RW Baird's US Private Equity division, and is also the co-founder of Protective Technologies Capital, an investment firms specializing in sensing, protection and control solutions (IoT).