Circle and Paxos Introduce Innovative Stablecoin Verification System
Circle and Paxos have embarked on a first-of-its-kind project to verify stablecoin issuers,aligning with new U.S. regulatory frameworks.
This pilot programme, a partnership with fintech firm Bluprynt, introduces a “know-your-issuer” mechanism. It aims to curb the proliferation of counterfeit tokens and bolster confidence in stablecoins.
The tool embeds cryptographic credentials directly into stablecoin transactions. This helps identify the legitimate issuers of popular tokens like USD Coin (USDC), PYUSD, and USDP. By doing so,it prevents copycat tokens mimicking real stablecoins without proper backing or approval.
Initial tests reveal the system can work across various blockchains. This gives clear insight into the origins of tokens for both regulators and issuers.It targets fraudulent activities in stablecoins, addressed by firms like Chainalysis.
The pilot ties closely with the recently enacted GENIUS Act, guiding federal oversight of dollar-backed stablecoins. This law is expected to accelerate adoption, pushing stablecoin use into trillions.
Circle and Paxos are preparing for a unified federal regulator. As an example,Paxos reapplied for a national trust bank charter,aiming to expand beyond its New York license.
Additionally, the KYI model could extend to other GENIUS Act-compliant tokens linked to tokenized U.S. Treasuries. Notably, Ethena’s USDtb and Frax Finance’s frxUSD could benefit. This innovation strengthens investor trust,enhances DeFi integration,and aids regulators by embedding provenance in protocols.
