Paxos, PayPal’s liquidity provider, has seen its trading volume increase considerably in the past few weeks after cryptocurrency trading became active on the platform with great success.
So, for anyone looking to track the cryptocurrency volumes going through PayPal … as Paxos (ItBit) is their liquidity provider and the exchange was making ~ $ 3m a day earlier, here’s a nice chart to follow. Bullish to say the least … – https://t.co/t9Fmj5m9WA @fintechfrank @paulchevs pic.twitter.com/rKbqK5a1bN
– Hunter Merghart (@HunterBM) November 12, 2020
Of course, these developments have led many to ask a fundamental question: How did a relatively small company like Paxos partner with a $ 200 billion dollar company like PayPal? The Answer – By building a regulated platform from the ground up, Paxos CEO Chad Cascarilla said in the latest edition of the Unconfirmed podcast.
In fact, Paxos was the first company to be approved as a trust company in upstate New York to manage cryptocurrencies and blockchains. According to Cascarilla,
“Doing this really framed us because we ask for permission, not forgiveness.”
Explaining the rationale behind PayPal’s support of the four cryptocurrencies – Bitcoin, Ether, Litecoin and Bitcoin Cash – Cascarilla said these four assets were essentially “ acquired ” by the SEC. Interestingly, the Paxos executive also said some questions remain about crypto assets outside of the top 4, adding that “it’s something we need to be sensitive about.” In fact, Cascarilla also went on to note that the market outside the top 10 cryptocurrencies is quite illiquid and relatively small cap.
Following the 80-20 rule, if 80% of trading takes place within the top 10 cryptocurrencies, or in this case, the top four, there are legitimate concerns about the safety of those product offerings, more than just “regulatory approval.” “. “
Although Paxos offers some asset-backed tokens, including PAX Gold (PAXG), compared to pure cryptocurrencies supported on the platform, it’s actually limited to the top four that Cascarilla talks about.
If PayPal wants to offer additional cryptocurrencies, it would require Paxos to offer support for them as well or partner with another liquidity provider.
The future is still upbeat for Paxos, however, as it has just received an action ban letter from the SEC to operate its blockchain-based equity settlement platform.
Putting things into perspective, the US stock market is worth $ 45 trillion compared to the cryptocurrency market, which is currently worth around $ 350 billion, a figure that could translate into opportunities to be a multi-asset custodian. Speaking of tokenized shares, Cascarilla concluded,
“The interesting thing about the liquidation of tokenized shares is whether they are public or private … putting assets on the blockchain tracks radically changes the way the financial system will function”