A new U.S.-dollar collateralized stablecoin has been given the thumbs up by crypto’s toughest regulatory regime.
The New York Department of Financial Services, creators of the controversial BitLicense regulatory framework, greenlighted the Paxos Standard coin on Monday and will regulate the asset.
Developed by Paxos, the Ethereum-based stablecoin is designed to function as a liquid alternative to cash that can be used for instantaneous settlement in financial transactions globally, while offering immutability and decentralized accounting capabilities.
An ERC-20 token, Paxos Standard will be issued by Paxos Trust Company and be fully-collateralized at a one-to-one ratio by dollars. The Paxos trust is chartered in New York and serves as a fiduciary and qualified custodian of customer funds.
Once an account has been opened, onboarded and a wire transfer of dollars has been received, Paxos tokens are minted and can then be used as a means of settlement in financial transactions instead of dollars. The tokens are burned upon redemption, ensuring that all tokens in circulation have corresponding dollars in custody.
Dollar deposits converted into tokens will be held in U.S. banks subject to oversight and regulation by the Federal Deposit Insurance Corporation, providing assurances and protections not available for other stablecoins currently on the market.