New York-based stablecoin issuer and blockchain infrastructure provider, Paxos, is addressing barriers to stablecoin adoption with the launch of the Global Dollar (USDG) and the Global Dollar Network (GDN). Unlike traditional stablecoins, USDG provides enterprises with a clear economic rationale for enterprises to issue, hold, and transact digital assets while enabling seamless integration into financial systems. As of September 2023, Paxos issued and redeemed over $120 billion in US dollar-backed stablecoins, including the Pax Dollar (USDP) and PayPal USD (PYUSD).

Aligning incentives within the Global Dollar Network ecosystem

Stablecoins are designed to maintain a stable value by being pegged to fiat currencies, making them more reliable for payments and transactions than other cryptocurrencies, which are volatile.

Recognising the potential of stablecoins to bridge traditional finance and blockchain, Paxos Singapore, a subsidiary of the company, launched USDG and GDN concurrently in November 2024. Developed in alignment with the Monetary Authority of Singapore (MAS) stablecoin regulatory framework, USDG is fully compliant with these stringent standards, while GDN serves as the infrastructure to drive global enterprise adoption and expand use cases for USDG. “Growing a network of stablecoins is a really hard thing to do yourself,” Ronak Daya, head of product at Paxos said. The GDN provides a shared infrastructure that simplifies the use of USDG across different platforms, bringing together digital asset platforms and exchange partners such as Anchorage Digital, Kraken, and Robinhood.

A big challenge in stablecoin adoption today is the lack of incentives, which limits enterprise engagement and integration into financial systems. “Enterprises that participate and use stablecoins don’t get any of the benefits or the economics of it,” remarked Daya. The GDN solves this with a yield-sharing model that redistributes revenue from USDG reserves to participants. “If you’re using a stablecoin, you should be paid appropriately for the value you bring in,” added Daya. With a yield-sharing model, Paxos hopes that the GDN can provide tangible value for enterprises adopting USDG, promoting its integration into various ecosystems and encouraging widespread adoption in financial operations.

Interoperability is crucial for stablecoins to function seamlessly across different platforms and achieve widespread adoption. “As an enterprise, you want to be able to accept stablecoins that your customers want,” noted Daya, emphasising the importance of flexibility.  The GDN is positioned as an enabler of interoperability through connecting stakeholders and standardising stablecoin usage across platforms.

Providing infrastructure that simplifies adoption  

Paxos also supports enterprises with blockchain infrastructure designed for interoperability and seamless integration. This versatile infrastructure is compatible with multiple stablecoins, including USDP and USDG. “We believe that our assets need to stand on their own benefit, and our infrastructure needs to be asset-agnostic in the long run,” said Daya.  Paxos’ asset-agnostic approach ensures that its systems are built to support a wide range of digital assets without relying on any specific one.

Paxos’ infrastructure also includes application programming interfaces (APIs) for seamless integration of stablecoin issuance and redemption into existing systems. By partnering with payment providers like Stripe, Paxos allows businesses to settle stablecoin transactions in fiat currencies such as the US dollar. This approach not only mitigates risk but enables enterprises to adopt blockchain securely and build confidence in its potential.

Integrating blockchain technology, which stablecoins and cryptocurrencies are built on, with legacy financial systems remains a significant challenge. “Most banks build technology in-house,” Daya explained. “When you get started on digital assets, you have to merge legacy systems with blockchain in a safe and compliant way.” This transition requires technical upgrades and a reassessment of compliance, risk management, and operational processes.  

“The effort to integrate legacy systems with blockchain is worth it, but the only way you’re going to find out is by trying it,” said Daya. He shared that many institutions use sandboxes, controlled environments for testing blockchain applications without disrupting core operations. However, successful stablecoin adoption requires not just the right infrastructure, but also the trust that stablecoins are both reliable and secure for enterprise use.

Building trust through regulatory compliance and transparency  

Trust is central to stablecoin adoption, especially in a sector where scepticism towards blockchain remains. “Crypto scepticism exists because it’s a technology that has evolved with challenges,” explained Daya. For enterprises, trust depends on safeguarding customer funds and ensuring operational reliability.

“Trusting a company comes by knowing who regulates them,” said Daya, highlighting Paxos’ compliance with stringent frameworks from the New York Department of Financial Services (NYDFS), the Abu Dhabi Global Market (ADGM) and MAS. Paxos holds a Major Payments Institution (MPI) licence from the MAS, which allows it to provide digital asset payment services in Singapore. This creates opportunities for Paxos to collaborate with financial institutions in Singapore, to develop potential new use cases and infrastructure for USDG. For customers, USDG currently offers a fully regulated way to earn a yield on stablecoins, an option previously unavailable in Singapore's financial system.

Transparency further builds confidence. “Stablecoins that enterprises can use for scale, need to have foolproof confidence that they can always maintain a one-to-one peg,” explained Daya. Paxos backs its stablecoins with liquid reserves, such as short-term US treasuries and cash equivalents, ensuring stability even during market volatility. Since 2021, it has issued independent, third-party monthly reserve attestation reports for USDP and PYUSD, with plans to extend this practice to USDG beginning in November 2024. Paxos has partnered with DBS Bank to be the main custodian of the reserves for USDG.

Paxos also educates enterprises lacking the expertise to navigate the complexities of blockchain technology. “We invest in educating enterprises on the use cases and the benefits of blockchain while highlighting the underlying security and management of our operations,” added Daya. By addressing misconceptions and providing guidance, Paxos enables enterprises to make informed decisions about blockchain adoption.  

Overcoming barriers to adoption

Paxos’ strategies outline a roadmap for stablecoin adoption by addressing integration challenges, fostering interoperability through initiatives like the GDN, and building trust through compliance and education. These efforts make stablecoins and asset tokenisation increasingly viable for enterprise finance.  

However, achieving profitability and navigating evolving regulatory frameworks remain significant hurdles. The GDN’s yield-sharing model encourages adoption, but its success depends on scaling the ecosystem and increasing transaction volumes. Paxos may need to explore alternative revenue streams, such as redemption or issuance fees, to sustain profitability. Paxos must continue attracting partners and broadening USDG’s use cases to ensure the network’s sustainability.

While Paxos has complied on the regulatory front, evolving regulations could introduce complexities. For example, Europe’s Markets in Crypto-Assets (MiCA) framework mandates that 60% of reserves be held in European banks, potentially conflicting with requirements in other jurisdictions.

Despite these barriers, Paxos’ initiatives demonstrate how digital assets, including stablecoins, can transition from niche tools to integral components of global financial systems. Through continued innovation and collaboration, the company is helping bridge the gap between legacy finance and blockchain technology.