It was recently announced that Paxos, a New York based blockchain company, has successfully received a ‘no-action letter’ from the Securities and Exchange Commission.
This letter, which is a response to an application filed by Paxos on October 25, 2019, paves the way for Paxos to begin offering blockchain based settlement services.
What is a No Action Letter?
One of the major hurdles continuing to plague the world of blockchain, is the ambiguity surrounding securities laws. There have been various companies, to date, that have acted in violation of securities laws, while under the assumption that they were not.
In order to avoid confusion, and possible future repercussions by the SEC, companies can apply for what is called a ‘no-action letter’. This application essentially allows the SEC to evaluate a company’s actions, before they are taken, determining whether or not they will result in any violations. By successfully attaining a ‘no-action letter’, the applicant can rest assured that provided they adhere to the specifics of their application, they will not be subject to any future enforcement measures.
The entire purpose of their application for a ‘no-action letter’, is to evaluate the viability of a settlement platform. Paxos indicates that this platform, which has been under development for multiple years, aims to provide clients with a variety of benefits versus settlements through a traditional clearing house.
Paxos notes the following points as areas in which their platform improves on traditional methods.
- Access to Short Settlement Cycles
- Immediate Access to Settlement Proceeds
- Increased Data Accuracy and Visibility
- Security and Availability
Simply put, this new platform has the potential to provide traders with a means of freeing up capital – post trade – in a secure and transparent manner.
While adoption of these services will surely grow in time, the platform looks to hit the ground running, with multiple clients already lined up. This includes both of the following banks.
- Credit Suisse
- Societe Generale
The participation by these banks should come as no surprise, as they have been known to dabble in blockchain over the past few years. For example, Societe Generale recently utilized the Ethereum network to issue and settle a $100M EUR bond.
In response to their application, the SEC broke down their decision in detail. While full details can be found HERE, the following excerpt outlines their decision as a whole.
“Based on the facts and circumstances described in the Request, and without necessarily concurring with your conclusions and analysis, the Staff would not recommend enforcement action to the Commission against Paxos if Paxos engages in the proposed activities described in your Request without registering with the Commission as a clearing agency pursuant to Section 17A(b)(1) of the Exchange Act.”
Operating out of New York, New York, Paxos is a blockchain company which was founded in 2012. Above all, the company works to serve the sector through the development of a variety of services including stablecoins, settlement capabilities, and post-trade activities.
CEO, Charles Cascarilla, currently oversees company operations.
The Securities and Exchange Commission (SEC), is a United States based regulatory body. This outfit is tasked with ensuring fair and transparent markets surrounding the issuance and use of securities.
Chairman, Jay Clayton, currently oversees operations at the SEC.