PayPal joins a major investment round in ‘plug-and-play’ crypto firm Paxos
Paxos, a New York-based cryptocurrency firm, announced a $142 million Series C funding round on Thursday that makes it one of the biggest firms in the fast-growing crypto industry. The new round, which means Paxos has raised more than $240 million in total, was led by investment firm Declaration Partners and included contributions from PayPal’s venture arm among others.
Despite raising plenty of money, Paxos has flown under the radar compared to more prominent crypto firms like Coinbase. This is largely because the company’s focus is on providing back-end financial plumbing to other firms, including digital bank Revolut. In October, PayPal announced Paxos was helping it manage its new consumer Bitcoin offering.
Paxos also stands out because its pedigree is purely Wall Street. While most other crypto founders are steeped in Silicon Valley and libertarian culture, Paxos CEO Chad Cascarilla cut his professional teeth at Goldman Sachs and Bank of America.
In an interview with Fortune, Cascarilla said financial infrastructure is a highly regulated field, and led him to build Paxos in close cooperation with regulators. He notes the company has access to the networks of the SWIFT money exchange network and to the Federal Reserve, and a no-action letter from the SEC to offer various crypto-related products—relationships that are unusual for an industry often defined by an outlaw mentality.
Paxos has also built a comprehensive technology stack that Cascarilla has described as a “plug-and-play” service. Its bread-and-butter product is a type of cryptocurrency known as stablecoins—a form of digital money pegged to a convention currency like the U.S. dollar, and backed 1-to-1 by an audited pool of reserves. Paxos has issued its own tradable stablecoin, and also white labeled stablecoins offered by several cryptocurrency exchanges.
While many of the details are arcane, the infrastructure Paxos is building is potentially transformative for fields beyond cryptocurrency. These include the stock market where Paxos has obtained permission to clear digital versions of shares—a process that could dramatically improve the speed and efficiency of how equities are traded. The company has also created digital tokens for gold that are tied to actual bars of bullion held in a London bank.
Other Paxos customers include Credit Suisse and Societe Generale.
Cascarilla acknowledges that the work carried out by Paxos isn’t particularly sexy, but says Paxos has enormous promise because it is a building a base layer of technology that is gradually being employed by giant corporations and financial institutions. He also claims the company is well-positioned because its customers don’t regard it as a potential competitor.
Paxos declined to provide details of its valuation or how much money it’s making, though Cascarilla noted the new capital infusion will allow it room to become profitable in coming years.
Other investors in Paxos include Mithril Capital, RIT Capital Partners plc, g RRE Ventures and Liberty City Ventures.
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