Paxos Secures SEC Approval to Facilitate U.S. Stock Clearing via Blockchain

Paxos’ new license places it in competition with established firms like DTCC, presenting a more efficient option for traditional finance institutions compared to legacy rivals.

What to know:

— Paxos Securities Settlement Company, LLC has achieved full registration to offer clearing and settlement services through the U.S. SEC.

— This approval removes a significant obstacle for Paxos in its pursuit of institutional tokenization of real-world assets.

— Utilizing blockchain for clearing, PSSC can settle eligible securities on the same day or nearly instantly, removing the conventional settlement period and unlocking capital for institutional players.

Paxos Securities Settlement Company, LLC (PSSC) has achieved full registration from the U.S. Securities and Exchange Commission (SEC) to provide clearing and settlement services.

Paxos, a stablecoin issuer, announced that this regulatory achievement makes its subsidiary the first blockchain entity authorized to function as a central securities depository (CSD) for conventional equities in the U.S., placing it alongside traditional post-trade systems like the Depository Trust & Clearing Corporation (DTCC).

This approval eliminates a bottleneck in Paxos’ aspirations for institutional tokenization of real-world assets (RWAs), enabling market participants to clear and settle digital asset transactions involving traditional equities, as per the SEC’s feedback to Paxos on March 11.

Paxos, which already possesses licenses from the OCC in the U.S., Singapore’s MAS, and Europe’s FIN-FSA, indicated that its designation as a central clearinghouse also permits it to integrate regulated stock clearing with its existing white-label infrastructure tools utilized by PayPal and Mastercard.

The SEC initially granted Paxos no-action relief in 2019, which allowed the company to launch a live settlement pilot in February 2020, facilitating partnerships with traditional finance (TradFi) giants such as Bank of America, Credit Suisse, and Societe Generale to clear daily U.S. equities transactions.

Paxos’ newly registered status enables it to completely bypass traditional settlement infrastructure. By utilizing blockchain for clearing, PSSC can settle eligible securities on the same day or nearly instantly, thereby eliminating the traditional settlement window and freeing up capital that would otherwise be locked for institutional participants.

In conventional capital markets, stock trades are executed in milliseconds, but final settlement—where cash is exchanged for legal ownership of assets—is processed through a centralized clearing house, usually the DTCC.

While U.S. equity markets transitioned to a T+1 (one business day) standard settlement cycle in 2024, legacy financial systems continue to face structural delays, trapped collateral, and counterparty risks.