Major financial firm Wedbush has joined the Paxos Settlement Service according to a recent press release. Wedbush offers its clients a range of financial services, and as a part of its business, clears stock transactions on US exchanges.
The Paxos Settlement System makes clearing stock transactions much easier, and has already been adopted by other major financial institutions like Societe Generale, Credit Suisse, and Instinet.
For the moment, the Paxos Settlement Services is operating under No-Action Relief from the Securities and Exchange Commission (SEC).
Until the Paxos Settlement Service is given permission to act as a full clearing agency, it will only be able to have a total of seven members. Paxos plans to apply for this permission in the near future.
Gary Wedbush, the CEO of Wedbush, commented,
“Wedbush has long been an innovator in securities clearing services…It’s crystal clear that Blockchain technology is destined to completely modernize securities settlement and custody. Paxos is way out in front in the evolution, and we are thrilled to be on board with this exciting new platform.”
Wedbush is likely correct, as the securities settlement process is archaic by any measure. In essence, settlement for a stock trade is simply moving data, which should be a fast and fully transparent process.
The world of financial institutions is finally waking up to blockchain, and how it can modernize securities trading and settlement.
Paxos Sees the Future Coming into View
There is little doubt that blockchain-based platforms will lower costs and speed up settlement time. In addition, as institutions become more comfortable with blockchain and tokens, the industry may see a move to use security tokens in increasing ways.
The CEO and Co-Founder of Paxos, Charles Cascarilla, told media,
“US equities settlement is opaque and relies on outdated technology. The Paxos Settlement Service reduces risk, enables greater trading liquidity and provides ownership transparency, which will revolutionize securities markets.”
What is true for US equities settlement is true in numerous markets, and these inefficiencies not only create higher transaction costs, but they also act as a limiting factor for liquidity.
Security Tokens are Coming Fast
The DeFi boom demonstrated that from a technical perspective, blockchain is able to create novel, liquid markets that can accommodate almost any structure imaginable.
The use of security tokens in established markets requires the full cooperation and support of regulators, which appears to be happening in the UK real estate market. Archax is planning to support trade in security tokens issued by Digi Shares on its fully FCA compliant exchange.
The tokens issued by Digi Shares represent real estate, and will allow smaller investors to enter a market that has traditionally been controlled by larger financial interests.
The Archax trading platform also permits international investors to buy and sell tokens, which means that securitized real estate assets will have a global investor base.
With a lower barrier to entry and a far wider investor base, securitized assets may rise in value as capital finds its way into new markets.
Hard Assets Are Likely to Create Lasting Returns
We have all watched as the NFT boom created public awareness of cryptos in a way that Bitcoin never did. However, NFTs are simply collectibles that don’t offer real investors any kind of return, nor do they allow the creation of value.
Security tokens, as well as the regulated exchanges that allow their trade, do allow new market dynamics to emerge. Retail investors can enter markets that were basically off limits a decade ago, and these markets now have the potential to go global.
The NFT boom was a blast to see play out – but it will likely seem small when compared to what happens when security tokens catch on around the world.