- Paxos got approval to launch its Pax Dollar on Solana, aiming to offer its stablecoin beyond Ethereum starting from Jan. 17, 2024.
- Solana’s faster transactions and lower costs make it an attractive option, with Paxos planning to seek regulatory approval for other blockchains.
Stablecoin issuer Paxos has achieved a significant milestone in its expansion efforts, receiving regulatory approval from the New York Department of Financial Services (DFS) to extend its products to the Solana blockchain. This is a significant step forward for Paxos as it expands its product offerings outside of the Ethereum network, where it was the only one allowed to launch its stablecoin, the Pax Dollar (USDP). January 17, 2024, is the scheduled launch date for Solana.
DFS Greenlights Paxos for Solana’s Debut
One notable feature of Pax Dollar, a fiat-collateralized stablecoin, is its one-to-one backing by the US dollar. Walter Hessert, head of strategy at Paxos, revealed that the regulatory nod from DFS came after an exhaustive review, granting a “non-objection” to expand USDP’s presence from Ethereum to Solana. The rigorous assessment focused on Solana’s internal risk framework, ensuring compliance and security.
This step sets Paxos apart from rivals like Tether (USDT) and USD Coin (USDC), which are not subject to DFS regulation. It establishes Paxos as a leader among regulated stablecoin issuers. Hessert emphasized, “We are the only company that has been issuing regulated stablecoins at scale.”
Solana’s Appeal: Faster Transactions and Lower Costs
The choice to launch on Solana was not made at random. Paxos and its partners see Solana as a compelling option due to its superior transaction speed and cost-effectiveness compared to Ethereum. With 50,000 to 65,000 transactions per second (TPS), the Solana blockchain can process much more than Ethereum’s current 30 TPS capability.
Paxos sees this as a calculated step toward improving its services and drawing in new partners. Notably, given Solana’s benefits in terms of cost-effectiveness and transaction speed, PayPal, a major participant in the financial services sector, should also consider bringing its stablecoin, PayPal USD (PYUSD), to the blockchain.
Paxos’ Wider Regulatory Ambitions
Paxos is not stopping at Solana and Ethereum. Walter Hessert, Paxos’ head of strategy, disclosed the business plans to apply for regulatory clearance for additional layer-1 and layer-2 blockchains. This illustrates Paxos’ dedication to broadening its footprint in the dynamic blockchain industry.
Paxos has been aggressively growing its global operations in recent months. The regulator in Singapore gave the corporation preliminary approval in November 2023 to establish a new entity that will issue a stablecoin backed by US dollars. In addition, the authority in Abu Dhabi granted Paxos permission to create stablecoins and offer digital asset services within the emirate.
Navigating Regulatory Hurdles
Paxos has seen its fair share of regulatory difficulties. The DFS started looking into the company earlier this year, although it initially didn’t disclose why. But Paxos’s participation with BUSD, a stablecoin developed in collaboration with the cryptocurrency exchange Binance, was the reason for this investigation. After that, the DFS ordered Paxos to stop releasing the token, a big setback for the business because this relationship accounted for more than 95% of its revenue.
Amidst regulatory upheaval, Paxos also had to deal with the breakup of its partnership with EDX Markets, a relatively new cryptocurrency exchange that had appointed Paxos as its custodian.
Solana’s Impact on Stablecoin Inflow
Although the stablecoin issuer faced obstacles due to these regulatory issues, the extension to Solana may positively impact the network’s stablecoin influx. According to recent data, Solana’s stablecoin market cap and growth have increased, especially in December. This is the first steady growth in several months, representing a substantial turnaround.
These events led to the rise of Solana’s native cryptocurrency, SOL, which is currently trading at $108.23 after rising 5% the previous day. During this time, there was also a noticeable increase in SOL’s trading volume.
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