Today Paxos announced the launch of the Paxos Settlement Service for commodities. The blockchain-based solution enables the simultaneous settlement of both the cash and commodity legs of a trade or delivery versus payment (DvP). So far, $1.5 billion of trades have been settled in the post-trade system, where participants include StoneX and Koch Metals Trading.
Previously Paxos unveiled a similar solution for stock trades in which Bank of America, Nomura’s Instinet, Credit Suisse and Societe Generale are system users. In 2019 the SEC gave Paxos a no-action letter to operate the stock settlement service on a limited basis through October 2021. The solution offers both same-day and two-day settlement without an early cut off time for same-day.
Both settlement solutions aim to address counterparty risk by using delivery versus payment.
“Paxos is building a global network with critical functions like multilateral payment netting to bring more efficiency and automation to settlement,” said Anoushka Rayner, Head of Commodities Growth at Paxos.
Paxos is a nationally chartered trust bank. To enable settlements, the buyer transfers money to Paxos via Fedwire. The bank holds the money in trust and digitizes it to create cash-on-ledger for use on the blockchain. Likewise, stocks or commodities are tokenized on the private blockchain that uses Ethereum technology.
“Outdated back-office infrastructure is an impediment to long-term value creation,” said Daniel Eld, Managing Director at Koch Metals Trading. “We’re pleased to leverage Paxos’ custody and settlement services and collaborate with Paxos as they refine this settlement network alongside leading industry participants.”
In April, Paxos raised a $300 million Series D at a $2.4 billion valuation, meaning it has raised more than $500 million to date.
Outside of post-trade solutions, the company has significant cryptocurrency and stablecoin activities. It operates cryptocurrency brokerage services on behalf of both PayPal and Revolut. Apart from its own Paxos stablecoin, it runs a stablecoin-as-a-service solution used by Binance USD, the third largest stablecoin with a market capitalization of more than $10 billion.