Paxos International’s USDL: A Limited-Access Stablecoin with Yield Potential

Paxos International’s recent launch of Lift Dollar (USDL) has ignited excitement in the digital currency community. USDL, Paxos International’s Yield-Bearing Stablecoin from ADGM, stands out as a yield-bearing stablecoin, offering a unique approach to stablecoin functionality. However, a significant hurdle to USDL’s potential impact lies in its limited geographic availability.

While USDL boasts a novel feature with its daily yield generation, its restricted accessibility raises questions about its ability to achieve widespread adoption. Major financial centers like the United States, the United Kingdom, Singapore, Japan, Canada, Hong Kong, and the European Union are currently excluded from USDL’s reach. Even within the UAE, the stablecoin is only available in Abu Dhabi Global Market (ADGM). This limited access could significantly hinder USDL’s ability to gain traction among a broader user base.

Early in April this year, Medad Holding and Franklin Templeton announced a partnership focused on introducing a pioneering tokenized digital asset – the yieldcoin. However, no further announcements have been made since then.

Yield Generation Mechanism and Secure Asset Backing

USDL holders earn overnight yield from short-term, high-quality liquid US government securities and cash equivalent reserve assets held under the safe protection and custody requirements of the FSRA. This reserve structure is similar to other Paxos-issued US dollar stablecoins that are backed 1:1 in value. Using an Ethereum smart contract, USDL distributes the yield generated from its reserves to eligible wallet addresses daily without requiring any additional steps by the token holder.

Limited Availability in the UAE: ADGM Takes Center Stage

Arvind Ramamurthy, Chief of Market Development at ADGM, said, “ADGM extends congratulations to Paxos International on receiving approval to issue its yield-bearing stablecoin, Lift Dollar (USDL), to select global markets. This achievement underscores the industry’s growth and innovation in the UAE and the wider region, made possible through FSRA’s progressive and credible regulatory oversight. We anticipate the continued growth of USDL and eagerly await the innovative products that Paxos International will introduce in this ever-evolving and dynamic digital asset market.”

Ramamurthy’s statement emphasizes the role of the Financial Services Regulatory Authority (FSRA) within ADGM in approving USDL. This suggests that the Central Bank of the UAE’s regulations, which licensed AED-backed stablecoins, are the factors limiting USDL’s availability in the mainland.

Paxos International’s Yield-Bearing Stablecoin from ADGM

Charles Cascarilla, Member of the Board of Directors of Paxos International, a UAE-based affiliate of Paxos, said: “The digital asset ecosystem has evolved to create mechanisms for token holders to earn yield on stablecoins, but these options are high-risk, opaque, and have led to the failure of numerous firms. USDL is a first-of-its-kind—a regulated product, earning and paying safe yield on a daily basis. Until now, only centralized issuers have benefitted from the economics of stablecoin reserves.”

Ronak Daya, Head of Product at Paxos, said: “Lift Dollar is the first stablecoin designed to benefit both end-users and distributors in a safe manner. Through Paxos International, eligible users around the world can access USDL directly through secure channels managed by trusted partners and watch their holdings grow daily in their wallets. Paxos International leverages a technical mechanism called rebasing to seamlessly distribute yield to users’ wallets.”

Critical Reflections and Regulatory Developments:

USDL’s launch represents a noteworthy advancement in the stablecoin arena, offering innovative features and regulatory compliance. However, its limited accessibility raises critical concerns about its potential for widespread adoption. Worth noting is the recent approval by the Central Bank of the UAE (CBUAE) of a comprehensive system for licensing and overseeing stable cryptocurrencies. These regulations provide clarity on the issuance, licensing, and supervision of AED-backed payment tokens, marking a significant development in the regulatory landscape.

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