Paxos Unveils USDL Stablecoin Offering Daily Yields, High Oversight, but Restricted Access
- Paxos has introduced the Lift Dollar (USDL), a stablecoin backed by the US dollar that offers users on-chain yield from US Treasury bonds automatically and daily.
- It’s offered by a Dubai-based entity but is not available in regions where regulators are keen on investor protection, including the US, the UK, the EU, Singapore and Hong Kong.
Paxos, a New York-based blockchain and crypto services firm, has unveiled a new stablecoin that allows users to earn yield daily.
The company announced Lift Dollar, or USDL, on Wednesday, describing it as “the new stablecoin standard.”
Introducing Lift Dollar ($USDL), a US dollar-backed stablecoin with regulatory oversight that democratizes access to US dollars, allowing you to safely earn yield on-chain.
1/8 pic.twitter.com/VYOxN6gruu
— Lift Dollar | USDL (@LiftDollar_USDL) June 5, 2024
USDL is an ERC-20 token through which Paxos seeks to depart from the existing stablecoin model, under which the issuers reap all the profits. Tether, for instance, made $4.5 billion in the first quarter of the year by investing the fiat that users pay to acquire USDT, the leading stablecoin in the market.
Paxos will structure USDL using the same model as its other existing stablecoins regarding issuance and backing. The company is behind PYUSD, the PayPal stablecoin that debuted last August, as well as its two in-house stablecoins, Pax Gold (PAXG) and Pax Dollar (USDP); the two have a combined market cap of $580 million.
USDL will be backed 1:1 with US dollars and short-term US government securities, just like Circle’s USDC and Tether’s USDT. However, unlike these two, Pax will share the revenue it generates from the securities with the stablecoin holders. The yield will be distributed via a rebasing mechanism under which the token supply will automatically increase or decrease depending on the rate of return.
In an interview, Paxos co-founder and CEO Charles Cascarilla explained:
We’ve added programmatic daily yield so this looks a little bit more like a savings product than a checking account product, which is maybe the way to think about traditional stablecoins. USDL is going one step further from democratizing access to dollars to also democratizing the risk-free rate in the safest manner possible.
Paxos to Transform the Stablecoin Market
Stablecoins have become a critical lifeblood for the crypto sector. At press time, they account for $162.3 billion in market cap and three of the top five most traded coins. This popularity has attracted several big players who are eyeing a stake in the lucrative market, including Ripple, which is set to launch its stablecoin later this year, as Crypto News Flash reported.
However, with the rise in popularity has come increasing scrutiny. Paxos has been compliant with its previous stablecoin, and with USDL, it has tapped its Dubai-based subsidiary, which is licensed and regulated by the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM).
A stablecoin with regulatory oversight.
USDL is issued and its reserves managed by Paxos International, a regulated entity overseen by the Financial Services Regulatory Authority in the @ADGlobalMarket.
4/8
— Lift Dollar | USDL (@LiftDollar_USDL) June 5, 2024
USDL will not be available in regions with strict regulations, including the US, the EU, the UK, Singapore, Hong Kong and Japan. Initially, Paxos mainly targets Argentina where inflation has been rampant for years.
