Stablecoins have been one of the hottest news topics of 2022. With all of the coverage the asset class receives, it’s hard to remember that stablecoins are still a novel technology and not always easy to acquire. That is especially true for asset managers and other regulated financial institutions. Significant infrastructure exists for retail users, but the mature financial plumbing to facilitate the seamless transfer of millions or billions or trillions of dollars in regulated stablecoins is not yet there. Paxos is working to change that.
We’re pleased to partner with Floating Point Group to streamline how financial institutions can get access to USDP and BUSD, the regulated stablecoins from Paxos. Floating Point Group is a cryptocurrency prime brokerage with an institutional trading desk and an advanced settlement platform. Floating Point’s institutional customers rely on stablecoins for the vast majority of their asset transfers, with more than 95% of value being transferred via stablecoins rather than traditional fiat rails. Those investors need safe stablecoins that fit within the traditional regulatory framework, meaning they are always redeemable, always stable (especially when markets are volatile), transparent in the same way as traditional financial products, and bankruptcy remote. That means Paxos stablecoins. We’re working with Floating Point Group to answer this demand.
Institutional investors have different demands when it comes to entering the digital asset market and risk management is a top concern. Crypto markets are volatile, which makes risk inherent, but the stablecoin an institution uses should not add risk. They should be the safe harbor asset where, when markets grow unstable, stablecoins remain a place of safety. The implosion of Terra and volatility of Tether this year have shown that is not always the case.
Stablecoins like USDP and BUSD from a regulated trust company like Paxos are the least risky stablecoins available today. Certain products may claim otherwise, but without a prudential regulator overseeing your past, current, and future reserving practices and management, an investor cannot be sure they are getting a stablecoin that is 100% backed by only government guaranteed cash and cash equivalents. And when the stablecoin is not issued by a Trust company that holds the dollars in segregated, bankruptcy remote accounts, then the stablecoin holder may be exposed to the issuer’s balance sheet and other activities.
That’s why institutional investors want stablecoins like USDP and BUSD. Paxos looks forward to working with first-class partners like Floating Point Group to continue to expand the reach of regulated, stable, properly designed stablecoins that fit the needs of retail and institutional users alike.