Paxos Raises $300 Million, Seeks National Bank Charter

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In Brief
  • Blockchain startup Paxos Trust has raised $300 million, raising its valuation to $2.4 billion.

  • The New York-based startup has applied for a national bank charter with the OCC.

  • Last month, Paxos successfully completed a pilot test of settling stock trades within hours instead of days.

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Blockchain startup Paxos Trust received $300 million in its latest funding round, raising its valuation to $2.4 billion.

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The Series D investment was led by venture capital firm Oak HC/FT. It also included existing investors Declaration Partners, PayPal Ventures and Mithril Capital.

Paxos plans to use the investment to increase its headcount, expand its regulatory compliance infrastructure, and scale its operations. It also plans to onboard several customers of its client PayPal.

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“The trajectory of our business, just like the space, has changed tremendously in the last six months,” said CEO Chad Cascarilla. The New York-based startup was able to raise $142 million during its Series C funding round in December 2020.

Paxos seeking additional regulatory certification

Last week, the company received preliminary approval to operate a national trust bank for digital assets from the Office of the Comptroller of the Currency (OCC). Paxos already received the New York Department of Financial Services state Trust charter in 2015. The combination will make it the first digital asset custodians to be regulated at both the state and federal levels. 

The OCC charter will enable Paxos to hold money directly with the Federal Reserve. This will allow it to “hold and move customers’ cash more efficiently,” Cascarilla said. Only two other crypto-native firms, Anchorage and Protego, have received national trust bank licenses so far. 

Paxos is also applying for a clearing-agency licence with the U.S. Securities and Exchange Commission (SEC). This, following a pilot test where Paxos used its technology to settle stock trades within hours of the transactions. Because this process has typically taken days, this could set a new precedent on Wall Street. Those particular trades were on behalf of customers of Credit Suisse and Instinet LLC, according to Cascarilla. Additionally, Paxos is testing technology to transfer shares and money in near-real time.

Into the crypto business

Paxos also powers the crypto brokerage services of PayPal and PayPal-owned Venmo. Recently, PayPal announced that users could make payments with crypto, while Venmo users can buy and sell crypto through the app.

The company also offers three stablecoins, including the US-dollar backed Paxos Standard (PAX). It also operates cryptocurrency exchange itBit and holds nearly $10 billion on deposit for its stablecoins. This is up from $2 billion at the start of 2021 and $250 million at the beginning of last year.

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Nick is a data scientist who teaches economics and communication in Budapest, Hungary, where he received a BA in Political Science and Economics and an MSc in Business Analytics from CEU. He has been writing about cryptocurrency and blockchain technology since 2018, and is intrigued by its potential economic and political usage. He can best be described as an optimistic center-left skeptic.

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