Since BUSD faced regulatory strangulation and faded from the center of the stablecoin stage last year, the issuer Paxos had to adjust its strategy and enhance compliance construction. Recently, Paxos announced the issuance of the Singapore-compliant stablecoin network Global Dollar Network (USDG), which has gained the participation of several crypto giants, and is promoting the widespread use of this stablecoin through reserve yield distribution.
Compliant stablecoin approved by the Singapore regulator introduces reserve yield distribution mechanism
After obtaining formal approval from the Monetary Authority of Singapore (MAS), Paxos announced the launch of the compliant dollar stablecoin USDG earlier this month. Currently, this stablecoin operates on the Ethereum blockchain and will expand to other public chains based on regulatory developments in the future.
USDG is backed by a 1:1 dollar reserve, which includes dollar deposits, short-term U.S. government bonds, and other cash equivalents. DBS Bank, the largest bank in Singapore by asset size, serves as the main banking partner for USDG and is responsible for managing its dollar reserves.
Paxos plans to release the first attestation report for USDG in November. This attestation report is intended to be issued by the independent third-party accounting firm Enrome LLP, and the review will be conducted according to the standards set by the Singapore Institute of Chartered Accountants. To establish community trust and ensure complete transparency and reliability of financial data, Paxos commits to publishing attestation reports monthly in the future.
In the fierce competition among various compliant stablecoins, USDG has also introduced an innovative yield distribution mechanism to enhance its competitiveness. "Stablecoins are reconstructing the financial system, fundamentally changing the way people interact with the dollar and payment methods. However, current mainstream stablecoins are unregulated and retain all the yields from reserve assets. USDG is actually a community token that returns almost all of the yields to participants, and anyone can join. The network aims to incentivize the use of stablecoins globally and accelerate the socialization of this technology," said Charles Cascarilla, co-founder and CEO of Paxos.
Unlike mainstream stablecoins such as Tether (USDT) and Circle (USDC), USDG allows its partners to receive up to 100% of the yields generated from assets supporting USDG on the platform. USDG will distribute rewards based on different participation methods and factors such as the liquidity created in the network, and custodians, exchanges, payment technology companies, and other financial institutions can join through official invitations.
Currently, the partners announced by USDG include Anchorage Digital, Bullish, Galaxy Digital, Kraken, Nuvei, Paxos, and Robinhood.
Strengthening compliance construction and promoting the expansion of the stablecoin landscape
Paxos is an important player in the stablecoin market and has consecutively received regulatory approvals from the New York Department of Financial Services (NYDFS), the Monetary Authority of Singapore (MAS), and the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market. The assets issued include USDP, PAXG, BUSD, PYUSD, USDL, and USDG.
BUSD, which once held a significant market position, suffered greatly after being investigated by multiple U.S. regulatory agencies in 2023. Although the U.S. SEC announced in July this year that it would abandon its investigation of Paxos and determined that BUSD is no longer a security, the market share of this stablecoin has been consumed by other competitors, and it has also dealt a significant blow to Paxos's reputation and business.
In the face of this challenge, Paxos has actively explored more cooperation opportunities and business models this year. For example, in January, the stablecoin USDP was officially launched on the Solana network; in June, Paxos launched a yield-bearing and dollar-denominated stablecoin Lift Dollar (USDL), regulated by the United Arab Emirates (UAE); in October, Paxos announced the launch of a stablecoin payment platform to provide stablecoin payment and withdrawal services for payment providers and merchants; in the same month, Paxos announced plans to integrate with the Stellar network, intending to bring assets to the Stellar network by the end of 2024.
In June of this year, in order to concentrate resources more on core businesses such as tokenization and stablecoins, Paxos made strategic layoffs. Nevertheless, Paxos still emphasizes its solid financial condition, holding more than $500 million in funds on its balance sheet.
Additionally, Paxos has also introduced talent with regulatory backgrounds to further strengthen its compliance system. For example, in May of this year, "crypto godfather" and former CFTC chairman J. Christopher Giancarlo joined the Paxos board to provide guidance and advice to the issuer.
"Blockchain and stablecoins are reshaping the financial system, allowing it to coexist with the internet. Stablecoins or digital dollars (dollars digitized through blockchain technology) are a key upgrade to payment systems, fundamentally changing the flow of currency, allowing more people to participate in the global economy, and ensuring the dollar's dominant position in the coming years." Recently, Charles Cascarilla reiterated the significant impact of stablecoins on the future of the dollar in an open letter to major presidential candidates in the U.S.
