Key Takeaways
- The SEC has approved Paxos Securities Settlement Company to operate as a registered clearing agency.
- The regulatory milestone enables Paxos to deliver same-day T+0 settlement for U.S. equities.
- Following a 7-year effort, legacy infrastructure providers like the DTCC now face direct blockchain competition.
SEC Opens Wall Street Plumbing For Blockchain Technology
The landmark decision makes Paxos the first and only blockchain-native enterprise approved to operate as a central securities depository (CSD) in the United States. The regulatory clearance allows the firm to provide delivery versus payment (DVP) clearance and settlement services for eligible U.S. equities, directly challenging the decades-old monopoly held by legacy clearinghouses like the Depository Trust and Clearing Corporation (DTCC).
Charles Cascarilla, the chief executive officer and co-founder of Paxos, highlighted the arduous regulatory journey during the Thursday announcement, stating:
“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.”
He further emphasized that the approval allows the company to offer “the most complete infrastructure” for financial partners seeking to evolve alongside the blockchain-enabled tech realm.
The SEC’s decision validates a multi-year track record of live clearing and settlement operations because, as far back as February 2020, Paxos had operated under an SEC no-action relief letter, quietly clearing and settling U.S. equities daily for major global broker-dealers, including Credit Suisse, Instinet, and Société Générale.
With the latest registration secured, Paxos could drastically expand its footprint across global capital markets. The firm, which is already prudentially regulated by the New York Department of Financial Services (NYDFS) and serves as the infrastructure backbone for stablecoins utilized by Paypal and Mastercard, will now push to integrate its clearing network across major trading venues.
Lastly, while the SEC has frequently utilized regulation by enforcement against digital asset exchanges and decentralized finance ( DeFi) protocols, it has also shown increasing willingness to integrate distributed ledger systems into heavily supervised, institutional frameworks. And with demand from major banks to tokenize real-world assets ( RWAs) and streamline legacy operations accelerating rapidly, this momentum stands to increase in the near-to-mid term.
