Blockchain Trust Firm Paxos to Launch Precious Metal-Backed Stablecoin Later This Year

Paxos Technology Solutions LLC, a New York-based fintech firm that is focused on “mobilizing” money, gold, securities, and other assets at “the speed of the internet,” is reportedly planning to introduce a digital token that will be backed by precious metals such as gold.

Chad Cascarilla, the CEO at Paxos, which has received $93.3 million in funding since being established in 2012, revealed in an interview (published on March 11th, 2019) with Fortune’s Balancing the Ledger that Paxos’ precious metal-backed digital token would “definitely” be launched at some point this year.

Cascarilla, a finance graduate from the University of Notre Dame, explained that developing a gold-backed crypto token could potentially be useful as it would allow investors to “take a [real-world] commodity [and] tokenize it.” Proponents of this method argue that by tokenizing real-world assets, it becomes easier, faster, and more efficient to conduct transactions.

Amount Of Gold You Have In Vaults Should Equal Number Of Outstanding Gold Tokens

Elaborating on how traditional assets can be tokenized on blockchains, Cascarilla remarked:

In order to put something [on] a blockchain [network], you have to make sure you have the right amount of inventory in the real world versus what is [kept on] the blockchain. How you do with a gold token is how much gold do you have in a vault equals how many gold tokens outstanding.

Cascarilla, a former financial analyst at Goldman Sachs, added that Paxos’ status as a licensed financial services company allows it to access the traditional banking system - in order to ensure and prove that they have enough assets in reserves to back the number of tokens they’ve issued.

Commenting on the difference between the Ethereum-based Paxos Standard Token (PAX) and other 1-to-1 USD-backed stablecoins introduced last year, Cascarilla said that PAX’s circulating supply has been fully audited and it’s approved and regulated by the New York State Department of Financial Services (NYDFS). According to Cascarilla, the PAX stablecoin also has a high level of liquidity.

Paxos Completed $65 Million Series B Funding Round In May 2018

First launched as a bitcoin (BTC) trading platform called itBit, the early stage venture-funded startup rebranded to Paxos recently and it now manages a trust company charter in New York. This allows Paxos to access some of the same banking services that are available to large financial institutions. This reportedly includes the ability to serve as a custodian for traditional financial assets.

In May 2018, Paxos had raised $65 million through a Series B funding round which was led by RRE Ventures, Liberty City Ventures, and prominent investor Jay Jordan. In December 2018, PAX token’s total transaction volume (to date) had surpassed $5 billion. This, just three months after the USD-backed stablecoin had been launched (in September 2018). At that time, the market capitalization of all PAX tokens in circulation stood at approximately $174 million.

At press time, the market cap of PAX tokens stands at $113 million according to CryptoCompare data.

Former Federal Reserve Nominee Announces Launch of New Stablecoin

  • Former Trump Fed nominee Stephen Moore has announced his collaboration to launch a stablecoin.
  • 'Frax' will be backed by a fractional reserve and generate interest through loans. 

Stephen Moore, a former nominee by President Donald Trump to join the Federal Reserve, has announced his intention to launch a new stablecoin

Moore, who was picked by U.S. President Donald Trump earlier in the year as a candidate for the Fed, says he is partnering with Ralph Benko and Everipedia co-founder Sam Kazemian, and will serve as chief economic officer for the project. 

The stablecoin, titled Frax, will be backed by a fractional reserve as opposed to being pegged tothe value of the U.S. dollar or another fiat currency. Frax will be able to generate interest by leveraging the reserve via loans, which should keep the price of the coin stable. 

Moore commented on the disruption Frax and stablecoins pose to the traditional financial markets, 

Central banks will soon feel the competition from private currencies such as Frax. The days of government monopoly of currencies by central bankers is coming to a screeching halt.

He continued, 

Currencies are intended to retain their value over time, but given the wild gyration in values of currencies and the struggle in many countries with hyperinflation, we need a global currency that has a stable value to benefit consumers, businesses and investors.

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