Paxos Securities Settlement Company (PSSC) received SEC registration as a clearing agency on May 28, 2026, under Section 17A of the Securities Exchange Act of 1934. The registration makes PSSC the first and only blockchain-native firm authorized to provide clearing and settlement services as a ce...
Paxos Securities Settlement Company (PSSC) received SEC registration as a clearing agency on May 28, 2026, under Section 17A of the Securities Exchange Act of 1934. The registration makes PSSC the first and only blockchain-native firm authorized to provide clearing and settlement services as a central securities depository (CSD) in the United States. The approval places Paxos inside the same regulatory category as the Depository Trust & Clearing Corporation (DTCC), which currently custodies over $114 trillion in assets and processes transaction activity measured in quadrillions of dollars annually.
The registration is designated as temporary by the SEC, preserving the agency's procedural review rights. Nonetheless, it represents the conclusion of a seven-year regulatory engagement that began with a 2019 No-Action Letter and progressed through a live settlement pilot launched in February 2020. That pilot processed real equity trades for AT&T and General Electric, with participation from Credit Suisse, Instinet, Bank of America, and Société Générale.
The approval arrives at a moment of structural transition in U.S. post-trade infrastructure. The SEC compressed standard equity settlement from T+2 to T+1 in May 2024, yielding a 41% reduction in counterparty credit exposure margin according to DTCC estimates. Paxos now offers same-day (T+0) settlement — one step further — at a time when DTCC itself is preparing to launch tokenized asset trading in July 2026.
The registration did not materialize quickly. Paxos navigated three distinct regulatory phases over seven years:
Phase 1 — No-Action Letter (2019). The SEC issued a no-action letter permitting Paxos to operate a blockchain-based settlement service for U.S. equities without registering as a clearing agency. The relief was narrow, limited in scope, and time-bounded.
Phase 2 — Live Pilot (2020–2025). In February 2020, Paxos launched its settlement pilot under the no-action relief. The pilot processed bilateral equity trades using a private, permissioned blockchain. Participants included Credit Suisse, Instinet (a Nomura subsidiary), Bank of America, and Société Générale. In April 2021, Instinet and Credit Suisse settled U.S. listed equities trades on a same-day (T+0) basis via the platform — trades executed at 11:00 AM and 3:00 PM ET were settled at 4:30 PM ET the same day.
Phase 3 — Clearing Agency Registration (2026). On May 28, 2026, the SEC granted PSSC registration as a clearing agency and central securities depository. The registration is temporary, a designation the SEC applies to preserve its authority to impose additional conditions or revoke the registration upon further review.
As a registered CSD, PSSC can hold and settle traditional securities trades directly on blockchain infrastructure. The key functional capabilities:
The eligible securities universe has not been publicly delineated in detail. The pilot processed equities (AT&T, General Electric), and the registration language references "eligible securities" without specifying asset class boundaries.
DTCC's dominance in U.S. post-trade infrastructure is, by regulatory and practical measures, a monopoly. A Yale Law Journal analysis documented how the SEC's own open-access and interoperability requirements, intended to promote competition, inadvertently paved DTCC's path to becoming the sole clearing and depository entity in the United States.
The numbers quantify the scale:
| Metric | Figure | Source | |--------|--------|--------| | Assets under custody (DTC) | $114 trillion+ | DTCC, May 2026 | | Annual transaction processing | ~$4.7 quadrillion | DTCC filings | | FICC daily volume record | $11.8 trillion | DTCC, June 30, 2025 | | Clearing participants | 50+ exchanges and venues | DTCC |
NSCC is the sole remaining equities clearinghouse. DTC is the sole remaining CSD. Both are subsidiaries of DTCC. PSSC's registration creates, for the first time in decades, a second authorized entity capable of performing CSD functions in U.S. securities markets.
DTCC is not standing still. In December 2025, the SEC issued DTC a three-year no-action letter covering tokenized versions of Russell 1000 equities, major index ETFs, and U.S. Treasuries. DTCC's subsidiary is building its ComposerX platform to layer distributed ledger functionality onto existing centralized book-entry systems.
The rollout schedule, according to DTCC:
DTCC's approach differs from Paxos in a fundamental architectural choice. DTCC is tokenizing assets that already sit within its custody infrastructure — adding a blockchain representation layer atop its existing centralized ledger. Paxos is using blockchain as the primary settlement rail. The distinction matters: DTCC's model preserves its existing network effects and participant relationships. Paxos's model requires participants to adopt a parallel infrastructure.
The economic argument for shorter settlement cycles centers on capital that market participants must post as margin during the settlement window. Longer windows mean more counterparty risk exposure, which means more collateral locked up.
The U.S. moved from T+2 to T+1 on May 28, 2024. DTCC estimated the compression yielded a 41% reduction in counterparty credit exposure margin requirements. For a system processing trillions daily, a 41% margin reduction translates to tens of billions in freed capital across the industry.
Same-day settlement (T+0), which PSSC demonstrated in its pilot, would compress the window further. The marginal capital freed by moving from T+1 to T+0 is smaller than the T+2 to T+1 jump — but for large institutional participants executing billions per day, the operational and liquidity benefits remain material.
The trade-off: T+0 eliminates the netting window. In a T+1 cycle, NSCC batches and nets trades overnight, reducing the gross number of settlements. Same-day bilateral settlement, as Paxos offers, requires each trade to settle individually. This can increase operational throughput requirements, even as it reduces counterparty risk.
Paxos has raised over $500 million in venture funding, with a reported valuation of $2.4 billion as of April 2021 (the most recent publicly reported figure). In December 2025, Paxos Trust Company converted its New York Department of Financial Services limited purpose trust charter to a national trust charter under the Office of the Comptroller of the Currency (OCC), making it a federally regulated entity operating across all 50 states.
The company is now prudentially regulated by three authorities:
Paxos's broader business extends beyond settlement. It issues stablecoins including PayPal USD (PYUSD) and Global Dollar (USDG), and Pax Gold (PAXG), a gold-backed token. Its institutional partners include PayPal, Interactive Brokers, Mastercard, and Mercado Libre. The $48.5 million New York settlement in August 2025 related to Binance-related compliance failures is a noted regulatory blemish, though it pertains to the stablecoin business (BUSD), not the securities settlement operation.
Several factors limit the near-term impact of the PSSC registration:
Temporary status. The SEC designated the registration as temporary. This preserves the regulator's ability to impose additional conditions or revoke the registration. The timeline for conversion to permanent registration, if it occurs, is undefined.
Network effects. DTCC's dominance rests on the fact that virtually every U.S. broker-dealer, bank, and institutional investor already connects to its infrastructure. Paxos must convince market participants to integrate with a second settlement system. Bilateral settlement avoids DTCC's multilateral netting, but it also means each counterparty pair must independently agree to use PSSC.
Eligible securities scope. The announcement references "eligible securities" without providing a comprehensive list. The pilot covered individual equities. Whether the registration extends to ETFs, fixed income, or other asset classes remains to be clarified.
Volume and track record. PSSC has demonstrated proof of concept, not scale. Settling individual equity trades for AT&T and GE between four institutional counterparties is materially different from processing millions of trades across thousands of participants daily.
Regulatory arbitrage risk. If PSSC operates under lighter oversight than DTCC (which is designated as systemically important financial market infrastructure), regulators may impose additional requirements as volumes grow.
The PSSC registration is a regulatory precedent, not yet a market shift. DTCC processes $4.7 quadrillion annually and custodies $114 trillion in assets. Paxos has demonstrated same-day settlement for a handful of equities between four institutional counterparties. The gap between proof of concept and systemic infrastructure is measured in orders of magnitude.
What the registration does establish is optionality. For the first time since DTCC consolidated the U.S. post-trade landscape, an alternative exists within the same regulatory framework. Whether that alternative scales depends on factors largely outside Paxos's control: institutional willingness to adopt parallel infrastructure, SEC treatment of the temporary registration, and DTCC's ability to co-opt blockchain functionality through its own tokenization roadmap.
The economic logic is clear — shorter settlement windows free capital. The question is whether the market will choose a new entrant's native blockchain rails or the incumbent's blockchain-augmented version of the system it already controls.