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Stablecoins

Paxos Products See Uptick in Adoption

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PAX

Growing in Popularity

The world of blockchain has seen its fair share of stablecoins come and go.  However, with recent levels of adoption, it would seem as though Paxos has managed to establish themselves as a mainstay.

They have done this through offering a variety of products.  This includes not only their stablecoins, but through their settlement services.  This article highlights a few of the recent events surrounding the adoption of these offerings.

Paxos Standard (PAX)

One of the most popular use cases for stablecoins are through lending platforms.  Whether acting as collateral, or held in a high interest savings account, there is a clear demand.

PAX, in particular, just announced that market leading lending platform, BlockFi, has begun supporting their USD backed stablecoin.  Much like other stablecoins on the BlockFi platform, those who opt to hold their PAX in a savings account will be rewarded with an 8.6% interest rate.

This new found support prompted commentary from representatives of each, BlockFi and Paxos.

Zac Prince, CEO of BlockFi, stated,

“We’re excited to support PAX on our platform and help expand stablecoin availability, with market leading yields, to BlockFi clients. As our respective platforms continue to grow, we expect to find more ways to collaborate.”

Walter Hessert, Corporate Strategy for Paxos, stated,

“Earning interest on assets is a key aspect of global finance. Having this opportunity in crypto is important to growing the overall marketplace and bringing maturity to this asset class. We’re pleased that PAX is now available on BlockFi and look forward to bringing stablecoins to more people around the world.”

For those interested in taking advantage of such high interest savings accounts, don’t worry about getting your hands on PAX, as it is quite easy.  For example, Paxos notes that their popular stablecoin is available to purchase on over 100 different exchanges.

PAX Gold (PAXG)

While the concept behind PAX is similar to PAXG, there is one main difference.  PAX is backed by USD, while PAXG is backed by physical gold.

Much like the former, PAXG has seen an uptick in adoption.  This was most recently made apparent with the announcement that PAXG is available for trading through digital asset exchange, Smart Valor.  As a result, by opening up the asset for trading on a popular exchange, holders of PAXG now gain access to higher levels of liquidity, and overall ease of access to PAXG.

Kyle Libra, Product Director at Paxos, stated,

“PAX Gold is a truly unique product – it is the fastest and easiest way to buy, own and trade the highest-quality physical gold. Given the volatile market environment, it’s important that investors around the world can access this safe haven asset quickly and easily – PAX Gold does just that. With Smart Valor, customers with GBP, EUR or Swiss Francs can now buy PAX Gold and trade that against the biggest cryptos.”

Olga Feldmeier, CEO of SMART VALOR, stated,

“The US dollar lost 93% of its value over the last 100 years. In a view of the recent decision by the US Federal Reserve to lower the benchmark interest rate to 0% and relaunch its quantitative easing program with $700 billion, the greenback is set for further devaluation. With the breakout of the coronavirus we also might be heading into the deep recession like the Great Depression of the 1930s. This is the time when investors are in dire need for a real alternative to protect their savings. Therefore, we decided to move forward with listing of tokenized gold on SMART VALOR exchange.”

The adoption of PAXG on a trading platform is not the only example of interest.  Much like PAX, crypto-lending platforms are accepting this gold backed asset as a form of collateral.  More specifically, PAXG is able to be used on, both, Nexo and SALT.

Paxos Settlement Service

While stablecoins may be their bread and butter, Paxos has been diligently developing ancillary services, as it looks to bring new efficiency to ‘legacy’ processes.

This can be seen through their, now live, settlement service.  While development of this began years ago, the project only recently became a reality when Paxos was successfully awarded a ‘No-action letter’, by the SEC.  This was, essentially, a statement made by the SEC that they would not take any enforcement action against Paxos upon launch of the service.  This statement was released after the SEC evaluated their plan, and service capabilities.

Once receiving this news, in late 2019, Paxos wasted no time in going live.  By early 2020 the company successfully went live with their first clients – Credit Suisse and Instinet Holdings.  In our previous look at this settlement service, we touched on its main benefits.

  • Access to Short Settlement Cycles
  • Immediate Access to Settlement Proceeds
  • Increased Data Accuracy and Visibility
  • Security and Availability

At the time of launch, representatives from each, Paxos and Credit Suisse, commented.

Charles Cascarilla, CEO of Paxos, stated,

“Launching Paxos Settlement Service under No-Action relief is the first step in our journey to transform post-trade infrastructure in the securities industry. We’ve worked closely with Credit Suisse and Instinet to build a solution that can deliver long-term cost benefits and together we will refine the system in a live environment. Our upcoming application for clearing agency registration demonstrates our dedication to modernizing market structure on a large scale.”

Emmanuel Aidoo, Head of Digital Asset Markets at Credit Suisse, stated,

“The initiative has the potential to deliver great efficiency and cost savings to the post-trade cycle. Paxos Settlement Service introduces blockchain technology that’s compliant with regulations and allows us to take important strides towards evolving market structure and unlocking capital that is tied up in legacy settlement processes.”

PAXOS

Founded in 2012, Paxos maintains operations in New York City.  Above all, the team behind Paxos strives to develop a variety of products which service varying markets.  These range from Stablecoins, to post-trade activity, settlement capabilities, and more.

CEO, Charles Cascarilla, currently oversees company operations.

In Other News

Adoption by exchanges for the trading of, both, PAX and PAXG? Check.  Adoption as collateral through lending platforms? Check.  Adoption through eligibility for savings accounts? Check.  Adoption of ancillary services surrounding trade securities settlement?  Check.

It is fair to say that popular stablecoins may have a newly established rival.

Beyond products specific to Paxos, we have looked at Stablecoins as a group in the past.  With their rise in popularity, we have seen potentially gimmicky concepts alongside high potential ones.  The following article takes a look at a few of these.

Stablecoins – Are the Gimmicky or Trendy?

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Joshua Stoner is a multi-faceted working professional. He has a great interest in the revolutionary 'blockchain' technology. In addition to this, he is a licenced Paramedic in Nova Scotia, Canada. As such, he can provide emergency care/medicine to any situation necessitating it.

Blockchains

Raiffeisen Bank in Cooperation with FinTech Billon to Pilot Digitized National Currency

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Raiffeisen Bank in Cooperation with FinTech Billon to Pilot Digitized National Currency

The transformation of the payments industry is in full swing. Driven by FinTechs, the payments technology innovation brings new ways of transacting on a global scale, with easier on-boarding, reduced waiting times and lower fees.

It’s no surprise that FinTechs also experiment with blockchain-based platforms that allow for tokenized representation of assets. One such platform is being developed by Billion, a British-Polish FinTech that is currently working with Raiffesen Bank on end-to-end digitized national currency transfers.

Raiffeisen to Pilot Digitized National Currency Project

According to a report, the Austrian banking giant successfully tested Billon’s tokenization platform, dubbed RBI, and moved the project from a proof-of-concept to a pilot project.

Borne out of Raiffeisen Bank International’s (RBI) Elevator Lab acceleration program, the tokenization platform is based on Billon’s distributed ledger technology (DLT) with the goal to enable tokenization of national currency.

Billon was founded in 2015 and is a FinTech company working on integrating national currency transactions, document and identity management tools into a single architecture.

The goal is to bring blockchain capabilities into the regulated world. This is in line with the global trend of commercial and central banks building blockchain-based infrastructure that comply with payment and data regulations.

FinTechs Augmenting Banks

The system from Billon enables banks to complete transactions that have higher settlement speeds, accurate payment status, reduced exception handling and as a result reduce customer inquiries.

Transactions with this system can have additional data or documents attached to them, accelerating the verification and validation process for e.g. the source of funds. Consequently, transfers are quickly settled and cleared while maintaining a clean audit trail and full transparency.

Both Billon and Raiffeisen Bank International plan to pilot the digital currency by the end of this year. The trial is set to include RBI’s corporate and institutional clients. Should the test period be successful, the Austrian bank could start using it in Central and Eastern European (CEE) countries where it has an extensive presence.

Stefan Andjelic, blockchain hub lead at Raiffeisen Bank International, spoke of the necessity of banks having to partner with FinTechs to meet new consumer demands:

“Billon is a great example of a fintech that understands how to adapt blockchain to serve the needs of banks and their clients. Specifically, during the COVID-19 situation, banks need to partner with fintechs to innovate faster and help clients with payments processing and liquidity needs.”

The full extent of the benefits from a tokenized platform are yet to be felt when deployed in a full working environment, but Billon expects the bank to improve customer experience, differentiate its offering and achieve cost efficiencies at several steps during the process.

Blockchain and Banking

There is a noticeable trend amongst commercial and central banks to develop new payment rails and exploring blockchain-based solutions.

Among the first household names in the financial world to entertain the idea of a digital currency was JP Morgan with its own JPM Coin that is marked for settling internal transfers for its corporate clients. Nonetheless, up to this day there is no update from the banking giant about fully deploying the JPM Coin.

At the same time, many central banks across the globe are taking decisive steps to launch their own digital currencies, clear examples being People’s Bank of China with the digital Yuan and the Banque de France testing a digital version of the Euro.

At the highest level, institutions are studying the feasibility of digital currencies and how these can be implemented in the current monetary environment.

VISA is another company whose involvement with digital currencies testifies the looming change in how payments are made. The payments giant has also filed for a patent in the United States to develop a digital fiat currency.

The Trend to Go Digital

The willingness to bring forth a digital version of a currency has also been exacerbated by the current COVID-19 pandemic. Transitioning to an almost fully digital experience could become a prerogative for many companies.

In the wake of the pandemic outburst, the Bank for International Settlements (BIS) published a report on how physical cash could transmit viruses, including the COVID-19. As a result, the BIS advised financial institutions to utilize digital methods of payment transactions, while advocating for central bank digital currencies (CBDC).

With this new blockchain-based initiative with Billon, Raiffeisen Bank is definitely on track to bring better digital payment methods to their offering.

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Bonds

France’s Central Bank Completes Security Issuance with Digital Euros

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France's Central Bank Completes Security Issuance with Digital Euros

A major milestone towards the launch of a Central Bank Digital Currency (CBDC) was achieved in Europe, and more specifically in France.

The acceptance of a digital currency on a global or even on a national level was perennially viewed as a pipedream. Nonetheless, even after dismissing the biggest digital currency in the world – Bitcoin – nation states and central banks started to pay more attention and work on their own currency’s digital version.

While several countries have made some progress, China is known to be at the most advanced stage for launching its own CBDC. At the same time, news of a successful test for a digital Euro comes from France’s central bank.

Banque de France Unveils CBDC Progress

The Banque de France unveiled that it used the blockchain developed by its own team to settle the issuance of digital securities, using end-to-end blockchain infrastructure.

This first successful test was done in partnership with one of France’s biggest banks – Société Générale. In what is called a covered bond issuance, the total value reaches the €40 million (~$44 million) mark.

This becomes a noteworthy milestone for digital security issuance, since the transaction was instantly settled via the delivery versus payment (DvP) method directly against digital Euros.

Société Générale has lauded the results of the test and is highly optimistic in regards to the benefits digital currencies can bring, saying “It paves the way for the automation and shortening of payment processes, with simplified market infrastructures and strengthened security.”

According to reports, the central bank digital currency is one to be used for interbank settlements, rather than consumer payments. With the positive outcome of this initial test, Société Générale is encouraged to undergo more rigorous testing in the coming weeks:

“This experimentation was performed end-to-end using blockchain infrastructures…It demonstrates the feasibility of financial securities being digitally settled and delivered in Central Bank Digital Currency (CBDC) for interbank settlements,” stated Societe Generale.

This also becomes a huge milestone for the Banque de France. The central bank’s ambition to test a digital currency was voiced late last year in December 2019, stemming from a political will to take on a leadership role within the European Union.

France’s Efforts on a Digital Euro Paying Dividends

The development activity and the encouraging test results around the digital Euro coming from Banque de France are cementing the country’s place at the forefront of digital financial securities landscape.

Banque de France said it will continue to do more tests with other financial institutions over the next few weeks, as part of its ongoing exploration of a digital Euro.

“The results of these experiments will be an important element of the Banque de France’s contribution to the more global reflection led by the Eurosystem on the interest of [a CBDC],” stated the central bank.

It’s not too long ago that the central bank launched its digital Euro programme. In April, the central bank said it aims to uncover the benefits of digital currencies for clearing and settlement of tokenized financial assets.

The central bank shared that since the programme launch, there have been a lot of applications and interest to test the central bank digital currency, emphasizing the leading role the country has in payments technology innovation.

This current iteration of the central bank digital currency is being earmarked to be used for and by financial institutions – not retail payments. At the time of the programme launch, the central bank said it is not looking to replace coins and banknotes.

According to the central bank’s governor, the consumer side would have to be complemented by a different digital currency that focuses on usability and may not be underpinned by blockchain technology.

The Race for the First Central Bank Digital Currency

France is not the only country to have started testing central bank digital currencies. Last month, China finally confirmed it had begun testing its digital Yuan in four cities. According to the People’s Bank of China it started researching CBDCs as far as 2014, and finalized a basic design back in January.

If governments were adamant of adopting a digital currency, now it seems central banks are racing to be the first-to-market. It’s not surprising as well, since a successful digital currency issued by a major central bank could be used as an international currency – potentially weakening the role of existing currencies, like the U.S. dollar.

Monetary experts have voiced their thoughts that a digital asset used on a global scale could significantly reduce the influence of the U.S. dollar on global trade and weaken its position as a world reserve currency.

Whether this will come from a digital currency built by a central bank or from a neutral digital asset like Bitcoin, it’s clear that the world of financial securities is set to go through a seismic change.

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Stablecoins

Libra Project Appoints First CEO – Stuart Levey

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Libra Project Appoints First CEO - Stuart Levey

Appointed

Progress is being made at the Libra Association.  A search committee, tasked with appointing their first leader, has just announced their decision.

Stuart Levey has been named the first CEO of the Libra Project.

Stuart Levey - CEO of Libra

Past Successes

While he might not be a household name, Stuart Levey boasts an impressive resume, making him an ideal fit for the position.

Notably, Levey served as the ‘Under Secretary of the Treasury for Terrorism and Financial Intelligence’.  He held this position for many years, performing well enough to be kept on through multiple administrations, which included, both, Bush and Obama.

More recently, Levey took a position working for HSBC as their Chief Legal Officer – an impressive position in its own right.

Cumulatively, these experiences, and more, have provided years of experience dealing with the world of finance in varying capacities.  Whether structuring government regulations, or immersed in banking practices, Levey has found success.  Now, Libra hopes this trend will continue, and that Levey will lead the project to a bright future.

Commentary

When the search for a CEO began at the Libra Association, a search committee was put in place to oversee the process.  Leading this group was Andreessen Horowitz General Partner, Katie Haun.  Upon announcing their decision, she had the following to say,

“Stuart brings to the Libra Association the rare combination of an accomplished leader in both the government, where he enjoyed bipartisan respect and influence, and the private sector where he managed teams spread across the globe. This unique experience allows him to bring a wealth of knowledge in banking, finance, regulatory policy and national security to the Association and strike the right balance between innovation and regulation.”

She continued,

“Stuart shares our vision for using blockchain technology to deliver a more open, inclusive and high-functioning payment system that puts crypto in the hands of billions around the world.”

Time of Change

The announcement of their first CEO marks an important development for the Libra Project.  While the project got off to a rocky start, due to skepticism from various levels of government, the project appears to be gaining steam again.

This skepticism has led to, essentially, a Libra 2.0 being drafted and put forth, marking important growth in project development.  With being in a state of flux, clear and competent leadership is a must.

Yet to be Quenched, Libra Still Being Forged through Criticisms and Growth

Libra

The Libra Project is an endeavour being spearheaded by Facebook.  The overarching goal of Libra is to facilitate financial inclusion.  The approach being taken, in an effort to achieve this, revolves around the creation of various stablecoins accessible to all.

In Other News

Beyond the announcement of Libra 2.0, and now a new CEO, the Libra Project has seen multiple ‘boosts’ in the past few months.  These revolve around a ground membership within the Libra Association, as, both, Shopify and Checkout.com have joined the ranks.

Checkout.com Eyes Financial Inclusion, Joining Libra Association

Libra Sees E-Commerce Giant, Shopify, Join the Ranks

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