Regretfully, these are real gold bars and not gold-wrapped chocolate bars (via Pixabay).
Cryptocurrencies,  Technology,  Tether

Paxos and Binance to launch dollar-based stablecoin

Meanwhile, asset-backed PAX Gold hits market Thursday

Paxos Trust, the company behind stablecoin Paxos Standard, announced plans to launch two new asset-backed coins. 

The most significant is an upcoming U.S. dollar-based stablecoin in partnership with  cryptocurrency exchange behemoth Binance to be called Binance USD (BUSD). The other is a gold-backed token, PAX Gold (PAXG), which hits the market on Thursday. Both have received the approval of the New York State Department of Financial Services (NYDFS), which regulates Paxos as a state-chartered trust company.

Binance and Paxos team up on Tether

Back in July, Binance launched BGBP, a stablecoin based on the British pound. Now it will have a regulated U.S. dollar stablecoin as well. More launches are likely, as the world’s largest exchange told Bloomberg in June that it planned to create a number of stablecoins backed by non-U.S. currencies. Yet at the time, it said it would not issue a U.S. dollar-backed coin.

The BUSD goes to market in late September with Paxos serving as the USD custodian and coin issuer. Paxos runs its own exchange, itBit, which focuses on institutional customers.

Details remain scant ahead of the official launch on September 12 at CoinDesk’s Invest:Asia conference in Singapore. But if some of it sounds familiar, it should: Paxos, along with Stable Universal, partnered with Huobi to power the exchange’s revamped HUSD stablecoin. That went live at the end of July

Considerably larger than Huobi, Binance is currently one of the top, if not the top marketplace for bitcoin (BTC) and other cryptocurrencies traded using the leading stablecoin, tether (USDT), according to data from CoinMarketCap.

Attempts to take on market-dominant Tether successfully have remained elusive for competing stablecoin issuers. CryptoCompare data show that Bitfinex’s sister company remains the countercurrency for roughly three-quarters of all bitcoin trades. With over $4 billion in market cap, Tether dwarfs Paxos Standard’s (PAX) $218 million.

One thing Binance USD will have that Tether doesn’t is the blessing of the State of New York. While the NYDFS has given its seal of approval for BUSD—the department already regulates Paxos—New York Attorney General Letita James has been pounding away at Tether and Bitfinex in court over questionable if not fraudulent loans and its shaky asset situation.

PAXG goes for the gold—or more precisely, the GLD

The other coin announced on Thursday, PAX Gold, is an ERC-20 token, with each whole unit representing ownership of one troy ounce of gold held by Brinks in London. Paxos had been talking about potentially launching such a product for the past six months.

Because it’s on the Ethereum blockchain, “at any time, token holders can look up the serial number, brand code, gross weight, fineness, and fine weight of their gold bar holdings using an Ethereum wallet address,” Paxos crowed in a press release.

Tokens are traded at London gold market prices on the Paxos platform, though “more exchanges and platforms will add it soon,” company spokesperson Dorothy Chang told Modern Consensus. They can be converted to and from fiat or else redeemed for gold bars via the Paxos website. That’s a marked difference from exchange-traded funds (ETFs), which essentially have contracts that can be redeemed for cash but not physical gold.

Paxos CEO Charles Cascarilla took a dig at gold ETFs, saying, “While it’s easy to trade gold derivatives—ETFs, futures, and unallocated gold—these are synthetic representations, not legal ownership of physical gold, and have limited accessibility.”

Nonetheless, gold ETFs hold 2,600 tons of gold—worth $119 billion—according to data from the World Gold Council. State Street’s SPDR Gold Shares (GLD) is the largest player, with about 823 tons of London Good Delivery (a very high quality) in storage. And while the NYDFS gave its blessing for Paxos to market to customers in heavily-regulated New York state, ETFs have a big advantage in that they can be bought by individual retail investors for things like individual retirement accounts (IRA) with online brokers. 

Where Paxos is hoping to have an advantage is on costs. ETFs sometimes charge annual fees of as much as a quarter to a half a percent annually for such things as storage costs and associated paperwork.

“We pay storage fees,” said Chang. Instead, PAXG will charge token creation and redemption fees on a tiered basis, depending on volume. There will also be an on-chain transaction fee of 0.02%.

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Lawrence Lewitinn, CFA was the founding editor in chief of Modern Consensus. Disclosure: Lewitinn owns no cryptocurrencies in his portfolio.