PAX Streamlines Redemptions in Battle for Stablecoin Market Share

Paxos is doubling down on a traditional approach to crypto custody and enabling instant stablecoin redemptions.

AccessTimeIconMay 13, 2019 at 1:01 p.m. UTC
Updated Sep 13, 2021 at 9:11 a.m. UTC
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Most crypto companies avoid comparisons to traditional banks. But Chad Cascarilla, CEO of the stablecoin issuer Paxos, welcomes the analogy.

“It’s akin to a bank account,” Cascarilla said, describing the new integration of Paxos wallets to the sister company itBit, a crypto exchange. “It has the look and feel in part of a bank account, in part of a custody account.”

As part of this new user interface, Paxos accounts now allow users to instantly redeem PAX dollar-backed stablecoins, which were previously only redeemable a few hours a day. The Paxos team said so far this stablecoin has facilitated $19.5 billion worth of transactions.

Stepping back, in 2018 Paxos and Gemini both ran incentive programs for their rival stablecoins, PAX and GUSD. Despite discounts on their dollar-pegged tokens, both assets failed to claim much market share from the godfather stablecoin, the partially dollar-backed token called Tether, and its scandal-riddled sister exchange Bitfinex.

Although so far Tether’s reign appears impervious to setbacks and continues to trade at high volumes, Paxos is focusing on making it easier to redeem PAX.

“I would say that recently it hasn’t been too bad to redeem,” an OTC trader, who asked to remain anonymous in order to protect his relationship with Paxos, told CoinDesk. “At the begining there was some pushback on it but it’s died down.”

Traders told CoinDesk in February 2019 that both Gemini and Paxos, to a lesser degree, were making it difficult to redeem their respective stablecoins for fiat.

Especially now with the automated feature, traders are able to redeem much faster and without the hindrance of internal politics. A second anonymous OTC trader said:

“I really appreciate that [PAX] is easily convertible to dollars.”

Perhaps there never was much competition between Tether more heavily regulated stablecoins. The second OTC trader said most Tether users aren’t looking for the “architecture and the framework” of a traditional bank like Paxos has. On the other hand, both institutional traders found Paxos’ level of security and compliance very appealing.

Gemini’s platform was deemed equally reliable. (The exchange company declined to comment for this article.) Yet the first OTC trader said there is hardly any appetite in the market for either GUSD or the newest contender in the stablecoin wars, the ethereum-backed DAI token.

“GUSD is basically dead in the water,” the trader said. “DAI hasn’t been doing well for a long time. You can see this in its liquidity, which is truly atrocious. DAI order books are really, shockingly thin.”

Speaking of the rare DAI traders, he added:

“Those are OGs who want to hold their DAI contracts and do it for political reasons.”

The dark horse in this stablecoin race has always been Coinbase’s dollar-backed token, USDC. The second OTC trader said over the past several weeks, since New York regulators clashed with Bitfinex over undisclosed documents related to Tether, there has been some modest increase in demand for both PAX and USDC.

“I think that the people that use Tether and that whole ecosystem have shown to be pretty resilient,” he said. “But there are people who use the other stablecoins on more regulated trading markets.”

Chad Cascarilla image via CoinDesk archives


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