On 28 October, regulated financial institution Paxos Trust Company announced that it had received No-Action relief from the United States’ SEC (Securities and Exchange Commission) to introduce its Paxos Settlement Service as a blockchain-based settlement platform. This means that no U.S. agency will take any enforcement action against the company for a service or product it provides.
The announcement also said that Paxos will begin processing transactions for a limited number of broker-dealers for certain listed U.S. equity securities. CEO and Co-founder of Paxos, Charles Cascarilla, said,
“The U.S. equities business continues to face unprecedented consolidation and economic pressures, requiring a comprehensive transformation of market structure. This is an important first step on our journey to reimagine the entire post-trade infrastructure, and one that creates immediate benefits for market participants.”
The settlement service is a permissioned blockchain designed for two entities to directly settle securities trades with each other. It also allows for the simultaneous exchange of cash and securities to settle trades, while also being backwards-compatible with current processes to simplify integration.
Among the first group of early adopters to use the service are Credit Suisse and Société Générale which, according to Paxos, marks the first time in nearly 50 years that U.S. equities will be settled outside of the legacy infrastructure. Paxos also claimed that this solution will help lower fees and provide clients access to capital which would otherwise be trapped in the legacy settlement system.
Paxos has also said that it would begin settling U.S. equity transactions once two of its early adopters file for approval with the SEC. Cascarilla added,
“We look forward to working with our early adopter partners to further develop the ecosystem. Together, we’ll create financial benefits and achieve operational efficiencies with blockchain technology that will facilitate an open financial system. We’re starting with U.S. listed equities, but this technology can be scaled to many asset classes across geographies and for all types of clients.”
