The SEC on May 27, 2026 granted Paxos Securities Settlement Company (PSSC) temporary registration as a clearing agency under Section 17A of the Securities Exchange Act — the first blockchain-native firm to receive such approval. PSSC becomes the eighth registered clearing agency and central secur...
"Our clearing agency registration is the result of seven years of work with the SEC." — Charles Cascarilla, CEO, Paxos
The SEC on May 27, 2026 granted Paxos Securities Settlement Company (PSSC) temporary registration as a clearing agency under Section 17A of the Securities Exchange Act — the first blockchain-native firm to receive such approval. PSSC becomes the eighth registered clearing agency and central securities depository in the United States, placing a distributed-ledger-based operator inside the same regulatory perimeter as the Depository Trust & Clearing Corporation, which custodies over $100 trillion in assets.
The approval is narrowly scoped. PSSC operates on a private, permissioned ledger. It settles only "Eligible Securities" that DTC already clears, cannot act as a central counterparty, and must launch commercial operations no earlier than March 2027. The registration expires after 18 months unless the SEC extends or makes it permanent. This is a controlled experiment, not an open license — but it is the first time the SEC has let a blockchain-native entity into the regulated post-trade plumbing that underpins U.S. equities markets.
SEC Release No. 34-105562, published in the Federal Register on May 29, 2026, grants PSSC temporary registration as a clearing agency under Exchange Act Section 17A. The order provides exemptive relief from Sections 17A(b)(3)(A) and (F), which govern organizational capacity and the safeguarding of securities and funds, for a period not exceeding 18 months.
The registration is entity-specific. According to the Morrison Foerster analysis of the order, it "does not establish precedent for other applicants." The SEC framed the approval as an opportunity to evaluate PSSC's live operational experience before determining whether broader or permanent registration is warranted.
PSSC's application process spanned seven years. The timeline: a 2019 No-Action Letter from the SEC, a 2020 settlement pilot processing equity trades for AT&T and General Electric, a formal application, and an Order Instituting Proceedings published on November 17, 2025 (Release No. 34-101759). The Biden administration did not renew the exemption when Paxos sought to continue the pilot, according to Ledger Insights. The current approval came under the second Trump administration.
PSSC operates a bilateral delivery-versus-payment (DvP) settlement model on a private, permissioned distributed ledger. The system tokenizes both securities and cash on-ledger, enabling what Paxos describes as "almost instant availability of securities and funds post settlement."
The operational flow works in four steps:
DTC maintains ultimate custody of the underlying securities throughout. PSSC functions as a settlement layer that sits on top of DTC's existing infrastructure, not as a replacement for it. Bilateral netting is supported during the temporary period, with multilateral netting planned for a future phase.
The system does not use a public blockchain. It runs on Paxos's proprietary permissioned ledger, which means transaction validation is controlled by Paxos and its approved participants — not by a decentralized network.
The SEC's order contains several structural limitations that define what PSSC is not:
Not a central counterparty. PSSC does not guarantee trades or absorb counterparty risk. Participants bear direct bilateral credit exposure without intraday or overnight credit protection from PSSC. This is a fundamental distinction from DTCC's subsidiary NSCC, which serves as the CCP for U.S. equities and absorbs counterparty risk on behalf of market participants.
DTC-tethered eligibility. An "Eligible Security" must satisfy two conditions: PSSC must affirmatively accept it, and DTC must already accept it for book-entry services. If DTC removes a security's eligibility, it automatically becomes ineligible at PSSC. The system cannot settle securities that DTC does not clear.
Pre-approved counterparties only. Participants may settle only with pre-designated "Counterparty Pairs." Any trade involving a non-approved party is automatically rejected. This eliminates the multilateral clearing model that defines most modern exchange-traded settlement.
No material expansion without SEC approval. PSSC cannot add new security categories, expand its operational model, or broaden its participant base beyond current parameters without filing an amended Form CA-1 application and receiving SEC approval.
No full clearing agency services. The order specifically does not authorize PSSC to provide the full suite of clearing agency services. It operates a CSD and settlement system only — it does not clear trades or manage a guarantee fund.
To understand PSSC's position, context is required. DTCC's subsidiary DTC surpassed $100 trillion in assets under custody in June 2025, according to DTCC's public disclosure. Its Fixed Income Clearing Corporation (FICC) reported peak daily buyside volumes of $3.1 trillion on December 31, 2025. NYSE average daily trading volume was approximately 1.54 billion shares valued at roughly $80.6 billion in mid-November 2025.
PSSC's approved scope — bilateral settlement of DTC-eligible securities between pre-approved counterparty pairs on a private ledger — addresses a fraction of this flow. The comparison is not PSSC versus DTCC today; it is PSSC as a proof of concept operating within DTCC's custodial wrapper.
The structural difference matters for economic value analysis. DTCC's model generates revenue from clearing fees, margin management, and data services across the entire U.S. securities market. PSSC's model generates value from settlement speed and operational cost reduction for a subset of bilateral trades. These are different value propositions serving different points in the post-trade chain.
PSSC's core pitch is same-day or near-instant settlement — T+0 versus the current T+1 standard that took effect on May 28, 2024. The economics are more complex than "faster is better."
The T+1 transition delivered measurable capital benefits. According to data cited in the SIFMA/ICI/DTCC T+1 After Action Report, the NSCC Clearing Fund decreased from $12.8 billion to $9.8 billion over a comparable three-month period following the T+1 switch — a 23% reduction. The volatility component of NSCC margin requirements fell by up to 41%.
Moving to T+0 would theoretically eliminate settlement risk entirely. However, industry analysis from SIFMA and Deutsche Bank has flagged a significant tradeoff: T+0 settlement substantially reduces netting efficiency. When trades settle immediately, they cannot be netted against offsetting transactions throughout the day. Estimates from industry participants suggest T+0 could require 30-50% more capital to be in motion at any given time compared to T+1 with multilateral netting.
PSSC currently supports only bilateral netting. For large institutional participants moving block trades between pre-approved counterparties, this may still deliver net capital savings — reduced margin requirements and freed collateral can outweigh the netting loss. For the broader market, the math is less clear.
This tension — speed versus netting efficiency — is the unresolved question at the center of blockchain settlement's long-term economics. It is not a question that PSSC's 18-month trial period is designed to answer definitively, but it will produce the first live production data from a regulated blockchain CSD operating in U.S. equities.
During its earlier pilot phase under the SEC's No-Action Letter, Paxos attracted participation from several institutional names. According to Paxos's public disclosures and press releases, pilot participants included ABN AMRO Clearing, Bank of America, Nomura's Instinet, and Societe Generale. Credit Suisse also participated before its acquisition by UBS.
The pilot processed equity trades for issuers including AT&T and General Electric, demonstrating same-day settlement capabilities. Specific volume data from the pilot period has not been publicly disclosed by Paxos.
Whether these or other institutions will participate in PSSC's registered phase — which cannot launch commercial operations before March 2027 — remains undisclosed. The counterparty-pair structure means PSSC needs at least two willing institutional participants per trading relationship to function.
Three implications are worth noting:
The regulatory path exists. Seven years of engagement produced a registered clearing agency. The path is slow, conditional, and heavily supervised — but it is real. Other blockchain infrastructure firms now have a precedent for the level of regulatory engagement required, even if the SEC has stated this order does not establish formal precedent.
The DTC dependency limits disruption potential. PSSC cannot settle anything DTC does not already clear. It cannot custody securities independently. It creates ledger-based entitlements against DTC-held assets. This architecture means PSSC complements rather than competes with DTCC's core infrastructure, at least in its current form. Whether a future, permanent registration could loosen this dependency remains speculative.
The 18-month clock creates urgency. PSSC must demonstrate operational viability, attract participants, and build a track record sufficient to justify permanent registration — all before the temporary approval expires. Failure to do so would not merely pause Paxos's ambitions; it would signal to the SEC and the industry that blockchain-based settlement cannot yet meet the operational standards of regulated post-trade infrastructure.
SEC Release No. 34-105562 is a regulatory fact, not a market verdict. It confirms that a blockchain-native firm can meet the SEC's threshold for post-trade participation — under strict conditions, for a limited time, within DTCC's custodial framework. What it does not confirm is whether blockchain settlement can operate at scale, attract sufficient bilateral liquidity, or resolve the structural tension between settlement speed and netting efficiency.
The 18-month clock starts now. By late 2027, the industry will have its first regulated production data on whether distributed-ledger settlement delivers measurable cost and efficiency improvements for U.S. equities — or whether the operational overhead and netting losses outweigh the theoretical gains. Until that data exists, the approval is a significant procedural milestone, not a proven economic advantage.