Paxos Risk & Liquidity Management Programs Protect Customers During Market Volatility

Paxos, the leading regulated blockchain and tokenization infrastructure platform, demonstrated how our prudentially regulated operational and liquidity risk management programs respond to heightened market activity and seamlessly delivered requested customer funds.

During a seven-hour period, Paxos’ treasury and operations departments processed more than $3 billion in customer stablecoin redemptions. Paxos continued to operate all products and service lines as usual during this time.

Paxos has built oversight, risk management and corporate controls into all aspects of our operations. Prudential regulators and independent third parties examine, audit and attest to our practices regularly to ensure we can withstand situations of external “stress” typical of the world’s most sophisticated financial institutions. Paxos’ ability to operate and process customer requests consistently speaks to our commitment to our clients and the strength of our risk management.

Recommended AI: Microsoft 365 Security Features Protect Business Data from Evolving Threats

Charles Cascarilla, CEO and Co-Founder of Paxos, stated, “Paxos is redefining financial markets by building prudentially regulated solutions that enable assets to move in real-time in a trustworthy way. We measure success on our ability to act with integrity, protect customer assets through any market cycle and innovate within regulatory frameworks. Recent market failures only demonstrate what Paxos has always known to be true – size and brand recognition are irrelevant if you do not have robust risk management practices that custody and protect customer assets in legally segregated, bankruptcy protected trust accounts.”

Paxos Trust Company holds the first limited purpose trust charter for digital assets from the New York Department of Financial Services (NYDFS). This prudential regulatory oversight ensures legal protections not offered by most issuers. Paxos provides customers with safety and security knowing that an independent prudential regulator approves of and examines our products, standards and practices.

Recommended AI: Consider Your DOOH Buying Methods Wisely: Direct Sales vs. Programmatic Buying

Paxos pursued this trust charter from a prudential regulator because it offers far greater customer legal protections than state administered money transmitter license (MTL) registrations. By working with a regulated trust custodian, customer funds are never commingled with Paxos corporate funds. Importantly,  all customer assets and stablecoin reserves are held in bankruptcy-remote, segregated accounts. In the unlikely event that a Paxos regulated entity becomes insolvent, legal standards clearly dictate how customers’ assets will be promptly returned to them outside of the corporate bankruptcy process. This is a distinguishing feature of Paxos’ BUSD and USDP stablecoins from MTL based and unregulated issuers.

Conversely, stablecoin issuers relying only on money transmitter licenses (MTLs) or money services business (MSB) registrations expose their customers to destabilizing risk of losses. These stablecoin issuers are not qualified custodians and do not submit to the oversight and product approval processes required by primary prudential regulators, which can lead to insufficient risk management practices. If these stablecoin issuers become insolvent, customers would be exposed to delays and courts could determine customer assets belong to the senior creditors of the issuer’s bankruptcy estate.

Paxos, above all, is a blockchain and tokenization infrastructure platform. It builds products and solutions for the world’s most regulated financial institutions and service providers. It upholds the highest level of risk management standards and practices to offer its clients security, stability and transparency at all times. Paxos will accelerate the mainstream adoption of blockchain and tokenized assets by being interoperable between digital asset ecosystems and traditional finance. Paxos addresses the blockchain and tokenization needs of global, regulated enterprises.

Recommended AI: Understanding the Role of AI in Gaming

[To share your insights with us, please write to sghosh@martechseries.com]