Despite Uncertainty, Paxos Grows as Calls for Regulation Expand

In many ways, the last few weeks in the digital asset industry have felt more like a few years. When the history of finance is written, recent events may make up the bulk of last year’s industry headlines, and rightfully so, but it’s also important to highlight other but important events from 2022.

I joined the Paxos team in February 2022 as the new Global General Counsel, eager to work for a financial infrastructure company with a regulatory-first approach. At that time, we were close to powering our one-billionth wallet, and global enterprises like PayPal, Mastercard, Interactive Brokers, Mercado Libre, Bank of America and more were enthusiastically adopting our regulated blockchain infrastructure products.

Paxos has continued to grow over the last year with record revenues, an expanding partner list and a growing team to help ensure our platform is institutional-grade and fully compliant.

However, 2022 wasn’t without challenges, and the biggest themes from last year within regulation were uncertainty, the evolution of the landscape, business headwinds and increased scrutiny.

Paxos leads, as regulation is front and center

Paxos took a proactive role this past year in shaping the regulation’s future and simultaneously bolstered its standing with its existing regulators. As the world’s most comprehensively regulated blockchain platform, this year, we invested time and effort into showing and explaining to our regulatory counterparts what “best-in-class” means for the blockchain industry. With the collapse of FTX, we’ve recognized once again the value of our constant vigilance, and deepening our policy outreach and our consistent investment in risk management over time has us well-positioned to be at the forefront of any new regulation.

If we’ve learned anything from this past year, Paxos’ long-standing hypothesis has been proven true – the best way to drive mass adoption is to build trust through regulatory oversight. In the wake of FTX’s collapse, many are scrambling to join us in our vision. In 2022 we had an opportunity to show the world what compliance and risk management should look like now and in the future. I’m incredibly proud of the feedback our team receives when interfacing with industry and government counterparts.

With scale comes complexity – and Paxos steps up

With enormous contributions from our commercial legal team, this year Paxos executed some of its biggest commercial deals yet, including MasterCard, Nubank, EDX and several partnerships yet to be announced.

These deals all required a dedicated expert and elevated legal practice. Due to the sheer complexity of the deals, the compliance team had to build bespoke processes for information and data collection – and they’ve risen to this challenge every time. As we continue to expand internationally, the legal and compliance teams have had to adapt and think not only about what our regulatory footprint allows today but what it may and must allow in the future.

Building for unpredictability in 2023

This year Paxos has stayed hypervigilant and monitored rapid shifts in real time. Whether we saw broad-based softness in the technology economy, a drop in crypto trading activity, the collapse of large crypto institutions or any number of other seismic shocks, again and again the Paxos team pivoted as needed. At the heart of these efforts are the tremendous people behind the scenes who never fail to rise to the challenges created in an unpredictable micro and macroenvironment.

As negative events occur, regulatory oversight tightens. But this can’t and won’t dissuade Paxos from achieving its objectives. At Paxos we focus on what we can control. We’ve been able to weather the storm and grow our team amidst uncertainty, and we will continue to focus on imbuing resiliency into our company DNA.

2023 prediction: Paxos grows stronger within the instability

The primary focus next year for our risk management teams, including compliance, legal, policy, risk, and securities, will be to focus on disciplined growth and evolution. We’ll continue to develop our teams and functions with the sophistication, maturity and expertise needed to meet the demands of a complex and growing business. This will mean adding new team members with specialized skills, upleveling existing processes and team structures, and having the courage to push forward where others are timid.

Though the calendar changes and we see potential market changes ahead, one thing that will not change is how we actively participate in thought leadership discussions. Despite the challenges of 2022, we are more convinced than ever that the blockchain industry has a bright future ahead of it. In 2023, Paxos will lead the way as we build a safe, sound, and next-generation financial services system for our customers.

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