Paxos Becomes First and Only SEC-Registered Clearing and Settlement Agency

TL;DR:

• The Paxos subsidiary becomes the only blockchain-native firm to achieve this regulatory status in the United States.
• The administrative development required a process of technical coordination with the supervisory body that spanned a period of seven years.
• The company conducted operational stock settlement tests with global banking entities within the U.S. regulatory framework since 2020.

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The Paxos subsidiary company obtained official approval to operate as a clearing and settlement agency under the direct supervision of the United States Securities and Exchange Commission (SEC).

The authorization, granted under Section 17A of the Securities Exchange Act of 1934, empowers Paxos Securities Settlement Company (PSSC) to manage eligible securities transactions. With this formal resolution, the entity establishes itself as the first and only native company of distributed ledger technology to integrate into the institutional framework of the North American financial system in this specific category.

Seven years of technological and regulatory adaptation

The integration process with the regulated structures of the traditional capital market represented a continuous technical development effort. The official Paxos statement notes that the corporate team worked for seven years in close collaboration with SEC staff to demonstrate the operational viability of its decentralized ledger systems.

Charles Cascarilla, CEO and co-founder of Paxos, said that this infrastructure allows its business partners to evolve directly alongside the current demands of global financial markets. The corporation already maintains technological service agreements with international-scale institutional payment platforms, among which PayPal, Interactive Brokers, Mastercard, and Mercado Libre stand out.

The technical validation of the protocol was based on a verifiable history of real transactions that the company processed under controlled supervision schemes. Data provided in the corporate report confirms that Paxos executed pilot programs for the clearing of U.S. equity shares starting in 2020, protected by an SEC no-action letter. The metrics from these tests demonstrated that blockchain-based post-trade cycles reduce operational costs and enable same-day transaction settlement.

Custody models and convergence with traditional markets

The operational structure approved by the regulator establishes that the subsidiary will function as a central securities depository (CSD) and settlement system. Unlike traditional clearing agencies that assume the role of a central counterparty, Paxos’ technical design supports bilateral delivery-versus-payment (DvP) settlement, which mitigates financial risk margin requirements.

For its part, the SEC details that this registration is granted under a temporary modality with a maximum validity of 18 months. This timeframe defines a period of strict regulatory evaluation, during which the government agency will oversee continuous compliance with asset protection rules and the technical robustness of Paxos’ permissioned network before considering a permanent license.

The corporate advancement of Paxos coincides with the restructuring of its comprehensive legal framework within the United States. The company completed in December the conversion of its New York limited-purpose trust company charter to a national trust charter regulated by the Office of the Comptroller of the Currency (OCC).

The operational projections derived from this double approval point to greater convergence between crypto assets and traditional securities markets. According to the registration terms published in the Federal Register, the platform will be technically enabled to officially launch its full commercial operations as a registered agency in March 2027.