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Paxos International Launches Yield-Bearing USDL Stablecoin
Stablecoins | Jun 6, 2024
Image: Freepik
Paxos International Introduces Lift Dollar (USDL) Regulated in the Abu Dabi Global Market (ADGM)
The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) has regulated Paxos International, an affiliate of Paxos, as an entity who has announced the launch of Lift Dollar (USDL), a regulated yield-bearing stablecoin, that offers daily interest directly into users' wallets while being closely supervised by regulators.
Highlights
- Short-term, highly rated, liquid US government securities and cash equivalent reserve assets will offer returns for holders of USDL. Every day, the yield is sent to holders' wallets programmatically using an Ethereum smart contract.
See: PayPal Introduces Confidential Stablecoin Transfers
- USDL operates under a strict regulatory framework of the FSRA ensuring Paxos International
- USDL is backed 1:1 by US dollar deposits just like other stablecoins issued by Paxos. This ensures stability and promotes growth through daily dividends.
Charles Cascarilla, Member of the Board of Directors of Paxos International:
"USDL is a first-of-its-kind—a regulated product, earning and paying safe yield on a daily basis. Until now, only centralized issuers have benefitted from the economics of stablecoin reserves. Paxos International has reimagined this dynamic so that all token holders can safely use and grow their regulated USD stablecoin holdings."
Stablecoins Continue to Innovate
Other Examples of Yield-Bearing Stablecoins
With a market capitalization of $162.3 billion currently, stablecoins have been growing and diversifying significantly. By 2024, there will be a number of yield-bearing stablecoins available worldwide, and new players are entering the market on a regular basis. A few noteworthy instances that provide yields using different financial methods are as follows:
- Midas (stUSD): This stablecoin interacts with decentralized finance (DeFi) platforms like as Uniswap, MakerDAO, and Aave, and is backed by US Treasury securities. By using Circle Internet Financial's USDC and asset management BlackRock as on-ramps, it seeks to generate yields.
- The Archax Yield Service provides stablecoin holders with yield-generating products like regulated Money Market Funds (MMFs). This enables owners of stablecoins to transform their assets into yield-bearing, regulated, tokenized holdings.
Market Trends
- The market is still led by USDC and USDT thanks to the US dollar's worldwide clout and the current higher interest rate environment.
- The demand for low-volatility assets and the integration of cryptocurrencies with established financial systems are stoking interest in stablecoins linked to regional fiat currencies.
- With frameworks like MiCA (Markets in Crypto-Assets) offering clarification and FIT21 presently before the U.S. Senate, regulation is becoming more clear. In order to give the stablecoin market more transparency and clearer norms, regulatory frameworks are changing. Because of the FSRA's strict regulatory control, USDL and related products are kept up to date with dependability and confidence.
See: Moody’s Analytics on Stablecoin Depegging
- Innovations like USDL, which offer yield directly to holders, are setting new standards in the stablecoin market by offering income-generating opportunities, making them attractive to a broader range of investors.
- Overcollateralization and diversification of collateral are emerging as key strategies to ensure resilience and stability of stablecoin ecosystems and help mitigate risks associated with single-point failures in collateral assets.
Overview of Abu Dhabi Global Market (ADGM)
Situated in Abu Dhabi, United Arab Emirates, on Al Maryah Island, ADGM is an international financial hub. ADGM was founded in 2013 with the objective of strengthening Abu Dhabi's standing as a worldwide centre for finance and business.
- Operates on its own legal framework founded on English common law, guaranteeing strict rules and guidelines for conducting business. The main regulatory organization in ADGM is the FSRA.
- Provides a broad range of financial services, with a focus on fintech advances, including capital markets, asset management, banking, and insurance.
- Has launched a number of programs, such as the Regulatory Laboratory (RegLab), a sandbox program to aid in the creation of cutting-edge financial services and products.
See: Challenges in Global Crypto Regulations – Lessons from Dubai
- Attracts international capital and encourages economic diversification, both of which are important contributions to the UAE's Vision 2030.
- By offering a controlled environment for digital asset trading and custody services, it has taken the initiative to promote the ecosystem of digital assets.
ADGM provides a business-friendly environment:
- 100% ownership by foreigners
- No limitations on the repatriation of capital
- Tax breaks for a predetermined amount of time
- A thorough legal and regulatory framework that guarantees the efficiency and transparency of corporate operations
Outlook
With the introduction of USDL by Paxos International, stablecoins have entered a new era that promises stability and yield in a regulated setting, which is well positioned to propel and transform the digital asset landscape.
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