Today Paxos Trust Company announced that Société Générale has been using the Paxos Settlement Service to settle U.S. equity transactions using blockchain. It’s the third broker dealer to go live in addition to Credit Suisse and Instinet.
“We believe that by streamlining equities settlements with the Paxos Settlement Service we’ll be able to deliver meaningful efficiency in our settlement operations in the long-term,” said Jeffrey Rosen, COO, Americas Global Markets at Societe Generale.
The solution enables the participants to settle bilateral transactions using a private permissioned version of the Ethereum blockchain.
Last year the SEC gave Paxos a no-action letter allowing it to operate the service on a limited basis through to October 2021. It can only support seven participants that have to have more than $100 million in capital. And a maximimum of 100,000 of any one stock can be traded between two parties per day. As a result the platform has traded $40 million in transactions since February.
“The No-Action relief phase gives us the opportunity to grow our network and refine the service with early adopters while we build toward a scaled solution that delivers long-term benefits industry-wide,” said Charles Cascarilla, Paxos CEO.
As previously outlined in more detail, if a stock is settled on the Paxos platform, the current owner moves the stock from their DTC account to the Paxos DTC account. Paxos then tokenizes the stock and the transfer is executed. For the cash leg, Fedwire transfers are made and the cash is then digitized. As a result, there is settlement risk, so there are margin requirements. Paxos said it would bear the cost of the margin up to a total of $100,000.
The equity settlement service does not use stablecoins. There is a little irony here in that Paxos is also one of the biggest stablecoin providers and stablecoins enable on-chain settlement. Not only does it support PAX, but it also partnered with two of the largest Asian cryptocurrency exchanges Binance and Huobi Global for their USD stablecoins.
To date, Paxos has raised $93 million in funding according to Crunchase.