Paxos subsidiary Paxos Securities Settlement Company (PSSC) has received official registration from the U.S. Securities and Exchange Commission (SEC) as a clearing agency. The company became the first and only blockchain infrastructure firm to receive this approval after a seven-year regulatory process.
The registration was granted under Section 17A of the Securities Exchange Act of 1934. With this status, PSSC is authorized to operate as a central securities depository in the United States. The approval is a temporary registration, subject to the company meeting ongoing regulatory requirements.
Paxos CEO and co-founder Charles Cascarilla summarized how the company reached this point in his statement: “This registration is the product of a seven-year journey. We began with our No-Action letter in 2019, then launched our pilot program with some of the world’s largest and most sophisticated financial institutions. Most importantly, it gives our partners access to the most comprehensive infrastructure that can continue to evolve alongside the market and blockchain technology.”
Pilot program ongoing since 2020
Since February 2020, PSSC has been offering clearing and settlement services for U.S. equities under the SEC’s no-action relief. The pilot program was conducted with the participation of “leading global financial institutions.” In 2022, a blockchain-based trial launched in partnership with State Street enabled same-day settlement, or the “T+0” model, for equity trades.
Based on the findings from this process, the company argues that blockchain infrastructure offers concrete advantages in both cost and speed compared to traditional post-trade processes.
Where traditional finance meets blockchain
This step comes at a time when traditional capital markets and blockchain technology are becoming increasingly intertwined. The Depository Trust & Clearing Corporation (DTCC) also recently announced its own tokenization service with the support of major Wall Street firms. Paxos’ SEC registration stands out because it places this convergence within a concrete regulatory framework.
Paxos already has partnerships with major names including PayPal, Interactive Brokers, Mastercard and Mercado Libre. The company also issues PayPal’s PYUSD stablecoin and the Pax Gold (PAXG) token. Last October, due to a technical error, the company accidentally minted 300 trillion PYUSD and then burned the amount. Following that incident, Paxos received conditional approval to become an OCC national trust bank; this status would allow the company to operate under a single federal framework instead of a state-by-state regulatory patchwork.
Paxos’ registration is a sign that blockchain infrastructure can no longer be ignored in institutional finance. Seven years of negotiations with the SEC and pilot programs may serve as a reference point not only for Paxos, but also for other companies trying to move forward in this field. Moving infrastructure layers such as clearing and settlement onto blockchain has mostly remained a theoretical debate until now. PSSC’s official registration brings that discussion onto a real regulatory footing.
