Investors will soon be able to buy gold and stocks in the form of cryptocurrency, the same way they might buy Bitcoin.
Paxos, a New York-based firm that already offers a dollar-backed cryptocurrency (known as a stablecoin) as well as Bitcoin trading services, plans to introduce digital tokens backed by precious metals and publicly traded stocks sometime in 2019.
The company launched its stablecoin, Paxos Standard, six months ago by tying cash reserves to a blockchain—a digital ledger of transactions that is the backbone of any cryptocurrency. Now, it wants to take “any type of asset and put it into a blockchain,” Paxos CEO Chad Cascarilla told Coins2Day’s“Balancing the Ledger.” The goal is to move assets and settle transactions more quickly and securely and with lower fees, he added.
In order to make it work, Paxos has to ensure that it holds the same amount of inventory—whether that’s dollars, precious metals, or stocks—in the “real world” as are registered on the blockchain. “How you do it with a gold token is how much gold you have in a vault equals how many gold tokens outstanding,” Cascarilla explained. “How do you do it with stocks? How many stocks do I have sitting in an account, equals how many stocks in the blockchain.”
Closest to reality is likely the tokenization of stock market equities and bonds, assets which Paxos has already successfully tested in blockchain transactions, Cascarilla said. “We’re getting pretty close, and I think we’ll see it in 2019.”
Cascarilla believes Paxos is the only cryptocurrency company with an account at the Depository Trust Company, which holds the vast majority of U.S. Stocks and bonds, positioning the firm to potentially become the first to bring stock trading to the blockchain. Still, Paxos, which was the first virtual currency company to be licensed in New York, needs additional approval from the U.S. Securities and Exchange Commission before it can roll out cryptocurrencies tied to more traditional securities. It’s currently awaiting that approval—something the lengthy government shutdown did not help speed along.
Putting commodities on the blockchain is also underway, and “gold is probably the most obvious,” Cascarilla said, adding that it would be introduced “definitely this year.”
Tokenizing precious metals opens up new possibilities that are currently physically difficult—such as dividing up a gold bar into smaller denominations, transporting heavy quantities more easily, or lending the assets out more efficiently, Cascarilla explained. “Having it sit in a vault but also having it be on a blockchain kind of bridges those two worlds,” he said.