Paxos Issues New Yield-Bearing Legally Compliant Stablecoin

• Paxos issued a new stablecoin, the Global Dollar (USDG), which is legally compliant with Singapore’s monetary laws.
• Unlike other legally compliant stablecoins, USDG will distribute a large portion of the interest earned on reserves to market participants that help propagate the stablecoin network.
• Big names like Anchorage Digital, Galaxy Digital, Bullish, Nuvei, Kraken, Paxos, and Robinhood back USDG.

Paxos, the former issuer of the now-defunct BUSD stablecoin, launched a new stablecoin called the Global Dollar, USDG compliant with the Monetary Authority of Singapore. The stablecoin is meant to be a legally compliant alternative to the likes of Tether’s USDT and Circle’s USDC.

The best of both worlds

USDG adopts features from the two largest existing stablecoins, USDT and USDC, like its pegging structure. Each USDG will be backed 1:1 by high-grade short-term government debt, predominantly US Treasuries.

This method of pegging is the most legally compliant as reserves are held with registered custodians and are liquid enough to fulfil redemption requests.

However, USDG is moving one step further to integrate yield-bearing features similar to purely on-chain stablecoins like Ethena, which are ultimately mechanisms to reward market participants that propagate the stablecoin’s use.

Paxos intends to share profit generated from its reserve assets with entities who help push USDG forward. Usually, stablecoin issuers like Tether and Circle retain all proceeds of their reserve assets as profits, a move which has proven highly profitable as Tether reported a $2.5 billion profit for Q3-2024.

However, Paxos’ CEO Charles Cascarilla, in an interview, stated that “This [USDG] is meant to be a community token” and that “Anybody can join the Global Dollar Network and accrue rewards for activity. We’re distributing something like 97% of the economics. That’s a big difference from how other stablecoins have been set up and created to date.”

Different from others in the family

USDG is not the only stablecoin that Paxos issues. Earlier in June 2024, the company issued the Paxos Lift Dollar (USDL) in UAE which is regulated by the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM).

USDL is a yield-generating stablecoin with a programmatic daily yield of around 5% for end users.

Unlike the mechanism employed with USDL, Paxos will share yields generated by USDG’s reserve assets with the companies that serve various functions that contribute to the growth of the stablecoin network rather than end users.

Other stablecoins in Paxos’ lineup include PayPal USD (PYUSD), Pax Dollar (USDP), and Pax Gold (PAXG). USDG is available in the United States.