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Paxos Gets SEC Clearing Registration, Settles Through Blockchain
Paxos Securities Settlement Company is the only blockchain-native firm with SEC clearing agency approval. The live equity pilot changes settlement risk for U.S. markets.
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The SEC granted clearing agency registration to Paxos Securities Settlement Company under Section 17A, making it the only blockchain-native firm with that status. The approval ends a seven-year regulatory process that included a 2019 no-action letter and a live U.S. equities settlement pilot that began in 2020.
The simple read is that a crypto-adjacent firm cleared a bureaucratic hurdle. The better market read is about settlement risk. Traditional clearing houses like the DTCC operate on T+2 cycles with multi-day reconciliation windows. A blockchain-based clearing agency can settle trades in near real time, cutting counterparty exposure and freeing up margin capital for market participants.
Paxos as the Only Blockchain-Native Clearing Agency
Section 17A registration gives Paxos the legal authority to clear and settle securities transactions on behalf of broker-dealers. No other firm using distributed ledger technology holds this designation from the SEC. That exclusivity creates a first-mover advantage but also concentrates risk: if Paxos's technology fails or its capital buffers prove insufficient, the knock-on effects hit every participant using its pipeline.
The exposure here is not direct market price risk. It is operational and counterparty risk that shifts from legacy settlement systems to a newer, less-proven infrastructure. For firms already in the pilot, the risk profile has improved: real-time settlement eliminates the gap between trade execution and final payment. For firms still on the sidelines, the question is whether enough liquidity and adoption exist to justify the switch.
What would reduce the risk: broader adoption by large investment banks and clearing members, transparent proof-of-reserves or regular audits, and integration with existing risk management tools.
What would make it worse: a technical outage at Paxos, regulatory scrutiny that slows adoption, or a liquidity shortfall at the clearing agency itself.