The first blockchain-based settlement of US equities was claimed by Paxos, the New York-regulated cryptocurrency startup, Instinet, the broker dealer owned by Nomura, and Credit Suisse.
The announcement that the Paxos Settlement Service is live has been made on Wednesday. This service allows the simultaneous exchange between cash and some of the Paxos’ Ethereum US-listed equities. The Paxos Trust Company made last year the announcement about the pilot that involves Société Générale and Credit Suisse being given the approval of the US Securities and Exchange Commission (SEC).
US Equities Settling Automatically in an Outside System
At the moment, the pilot stage may be running for 24 months and allow only 7 participants to handle 100,000 trades per day. Melayna Ingram, who is a Director Securities Product at Paxos said Société Générale should be integrated and go live until this quarter ends. Ever since the Depository Trust and Clearing Corporation (DTCC) has been formed, it’s the first time for US equities to settle automatically in an outside system.
As Ingram mentioned, most of the US equities innovations from the past 20 years have been in trading market venues and trade execution. Here are her exact words about what’s going on at Paxos:
“The back office has largely stayed the same, running on mainframe codebases and involving a complex system of reconciliation which is out of step with new technology.”
Paxos Will Apply to Be Fully Registered with the SEC
Paxos said it’s looking forward to apply this year with the SEC in order to become a registered clearing agency. At the moment, such licenses are given to only 7 US companies. Paxos doesn’t use an enterprise Ethereum client such as Besu, Quorum or BlockApps. Instead, it uses a private blockchain Ethereum code-based network.
Trying to explain the Paxos Settlement Service, the Credit Suisse’s head of digital asset markets Emmanuel Aidoo said:
“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.”