Will Regulated PAX Replace USDT for the King of Stablecoins?
Despite the prolonged cryptocurreny bear market, the topic of stablecoins has been generating a lot of buzz in the crypto community these days. Binance, the world’s largest crypto exchange by trading volume, has listed the Paxos Standard (PAX) token, a regulated cryptocurrency fully collateralized 1:1 by the US Dollar, as a base currency on November 30.
It’s the latest big news for the stablecoin. PAX, issued by the regulated trust company Paxos, is among the first batch of stablecoins which got full regulatory approval from the New York State Department of Financial Services in September.
The Ethereum-based stablecoin is designed to facilitate the frictionless assets movement around the world, while offering immutability and decentralized accounting capabilities. When a PAX token is in circulation, a corresponding dollar is in custody. It also boasts zero charging fees and is under a huge amount of oversight from regulators, the auditor and the independent board. So far, PAX has become the fastest-growing US Dollar-backed stablecoin, with support from over 30 major exchanges and OTC desks.
Charles Cascarillar,CEO and Co-Founder of Paxos, told 8btc in the interview that the mission of his trust company is to change the way in which assets move around the world,and in the future PAX will be listed on more major exchanges and used to digitalize various types of assets like bonds, stocks and gold bars.
8BTC: What’s the original mission of Paxos?
Charles: The original mission of Paxos is to enable the movement of any asset at any time in a trustworthy way. That is a big mission to accomplish because there are six hundred trillion dollars of assets in the world. We’re probably not going to move all of those, but a much bigger goal is to put other types of assets such as gold, stocks and bond into a blockchain world.It’s powerful because then you don’t have to rely on centralized intermediaries.
8BTC: Paxos’ team, especially board member of directors, looks prestigious. Why these experts willing to help the growth of Paxos as well as PAX?
Charles: The reason they joined is because they are also passionate about the mission of Paxos. For example,Sheila Bair who was served as Chairman of the Federal Deposit Insurance Corporation (FDIC) from 2006-2011 saw the whole financial crisis, and believes in how Paxos can change the financial system to make it much more responsive, fair and open system and accessible.
We have to meet board member of directors ten times a year as one of our regulatory requirements. Besides,we have a huge amount of oversight from regulators, the auditor and the independent board. So our customers can feel comfortable with us because their assets will be held in a secure way.
8BTC: The New York State Department of Financial Services has approved the issuance of two stablecoins in September,the Gemini Dollar (GUSD) and the Paxos Standard (PAX).Why did you decide to issue a regulated stablecoin? Is it complicated to issue it?
Charles: This is the first time any type of token has been approved by a regulator. The procedure of getting the approval is quite complicated. We worked with the regulator, created an application and submitted it. We told regulators all the different types of controls and procedures we put them in place so that all of our customers funds will be safe.
It generally takes somewhere between three and six months to get a new product like PAX approved, and we took 3 years to form a trust company which is organized under the New York Banking Law.
The reason we want to do this is because the mission the company has is to move any asset at any time. But it’s really hard to move cash.Especially, cross-border transactions could take days with lots of fees. In addition,moving cash with cryptos is unbelievably cumbersome.
Then we decide to create a reliable stablecoin pegged to the US Dollar as most assets trade against the US currency. And no other stablecoins are regulated, aside from PAX and GUSD, so an regulated stablecoin which is also audited and fully redeemable is of great importance in the case of moving cash.
So PAX is designed to be safe, reliable and flexible for the industry, enabling customers to move money around twenty four hours, seven days a week without a US dollar bank account and under the supervision of regulators. When you gives us one dollar, we give you one PAX token instantaneously without any fees.
8BTC: Why don’t you charge any fees for trading PAX?
Charles: Because we seek to allow money to move as seamlessly as possible.What we created is not only a regulated coin, but also an efficient one which is different from most of the other stablecoins.
8BTC: But how do you make profits from the business?
Charles: There are two ways. The first is that we get a lot of customers and we have a lot of other products. The second is we earn interest on the balances. Beyond a stablecoin we have other products, like its exchange, itBit.
8BTC: The key of fiat-pegged stablecoins is to ensure that all tokens in circulation have corresponding dollars in custody and this is the biggest problem of USDT. So how does PAX solve this problem?
Charles: Paxos is a trust company in which the money is always held in the customers name. If the stablecoin issuer doesn’t have a money transmission license,customers’ money is held as the corporate money. So money held with a trust company is the safest place it can be.
There’s a new group of stablecoins that have come out after USDT, trying to solve some potential shortcomings.
8BTC: What’s the road–map of PAX in 2019?
Charles: PAX will be listed on as many exchanges as possible, and we will make using PAX as easy and frictionless as possible.We are going to tokenize assets, like cash and gold bars and deal with crypto assets through our trading arm, itBit. Besides, we may even add new fiat-pegged stablecoins , like one for euro yen, etc.
What’s important for us is making sure we hear from our customers ,solve problems for them and make really seamless products.
8BTC: How do you think about security token or STO?
Charles: It depends on the jurisdiction. in the U.S., the security token would be the only way to launch an ICO under the SEC oversight.So you have to look at it country by country.
If it’s not a security token in the U.S., you probably have regulatory issues. And this is something that we can really help solve because of we are a trust company as well as a custodian.
8BTC: There are three types of stablecoins which is collateralized by fiat money/cryptocurrency and no pledge. How do you think of these three？ Which one is the best designed and why?
Charles: There’s fifteen trillion dollars of payments every day in the global economy and eighty percent of that has the US Dollar on one side.so the US Dollars used a lot. But people have to keep their dollars in the unit of account.
Given that the US Dollar is very stable on a daily basis, one that solves the biggest problem is creating a US dollar based stablecoin. So then you’re no longer tied to the banking networks.
8BTC: Do you believe the US government will issue a national digital currency?
Charles: Governments and regulators tend to move more slowly than a private sector. I haven’t heard anything about their desire to do that. But it will take at least 5 to 10 years for the government to have a blockchain-based currency. The good way is the private sector leads the way and the government can follow behind.
8BTC: Since you are a veteran financial analyst,how do you identify a “good” blockchain project?
Charles: “Good” projects understand their customers,and clearly know what are the biggest problems they can solve for customers.Further, a “good” project can make money and attract a lot of customers and. They understand what they’re solving today, but also how that will build over time.
8BTC: In the bear market,do you have any advice for blockchain entrepreneurs and the common investors?
Charles: I’ve been involved with Bitcoin and blockchain since 2010. this is the fourth Bitcoin winter I’ve seen. If you are an entrepreneur who believe in the industry ,then try to ignore the short-term price movements, focus on what the long term track and keep investing in the business. Because if you believe you business will be valuable, you believe you’re solving an important problem. Then it will take five or ten years to do it.
Further,entrepreneurs should have at least eighteen months of money in the bank, and try to stay lean on the expenses. What’s really important is that you try and stay as lean as possible while you build your product, and then go test the product. And as you’re testing your product, see if it’s beginning to work. And when it begins to work, you can always go out and raise money. The hard part is figuring out what product. Everyone loves the fun products that are working.
If you just are a crypto investor, do a lot of work and understand what you’ve owned. There’s a lot of coins and some of them probably won’t survive.
The bear market can go for another year, but it’s really hard to tell.It’s important to focus on what was the fundamentals that you’re looking at because the short term can be very difficult to figure out.