NEW YORK (Reuters) - Paxos Trust Company launched the first regulated, gold-backed digital token and later this month will debut a stablecoin pegged to the U.S. dollar, after getting approval from New York regulators on Thursday.
The stablecoin called BUSD was jointly developed by global cryptocurrency exchange Binance and Paxos and will be available on Paxos’ platform.
PAX Gold, on the other hand, is an asset-backed digital token, each representing one fine troy ounce of London Good Delivery gold stored in professional vault facilities in London. PAX Gold customers will own the underlying physical gold.
Paxos said the gold-backed token launched on its platform on Thursday.
“DFS is committed to encouraging innovation while providing regulatory oversight to keep New Yorkers and the rapidly evolving financial services market safe and sound,” said Superintendent of Financial Services Linda Lacewell in a statement.
PAX Gold is built as an Ethereum token, to make it easier to integrate with exchanges, wallets, lending platforms and other crypto products.
Binance Chief Executive Officer Changpeng Zhao said in a statement that through BUSD, the exchange hopes to unlock more financial services for the blockchain ecosystem.
In a separate interview with Reuters, Charles Cascarilla, chief executive officer and co-founder of Paxos, talked about gold, saying the problem with owning physical gold is that it is bulky and cumbersome, making it difficult to trade, or leverage against other investments.
What are currently traded are gold derivatives: exchange-traded funds, futures and unallocated gold, which are “synthetic representations,” not legal ownership of physical gold, Cascarilla said.
“What our product does is it actually squares the circle of the contradictions of the gold and commodity market,” Cascarilla said.
“If you come to us and you buy one ounce of gold, you send $1,500 of Paxos tokens and we give you one ounce. That ounce is actual legal title to an ounce of gold of a bar in a vault in London,” he added.
New York issued a limited purpose trust company charter in May 2015 to Paxos, formerly known as itBit Trust Company LLC, which operates the itBit Exchange, to offer services for buying, selling, sending, receiving, and storing virtual currency.
In September 2018, Paxos was authorized by New York to offer its first stablecoin, pegged to U.S. dollars, Paxos Standard. In total, DFS has approved three asset-backed tokens issued by Paxos: Paxos Standard (PAX), PAX Gold (PAXG), and BUSD.
Reporting by Gertrude Chavez-Dreyfuss; Editing by Chizu Nomiyama, Lisa Shumaker and Cynthia Osterman
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