U.S. financial markets are constrained by antiquated post-trade infrastructure that forces institutions into slow, capital-intensive batch settlement cycles. On Thursday, May 28, the Securities and Exchange Commission formally registered Paxos Securities Settlement Company, LLC (PSSC) as a clearing agency. The regulatory approval establishes PSSC as a central securities depository, making it the first blockchain-native firm legally authorized to clear and settle traditional U.S. equities.
The SEC met its statutory deadline, following a February Federal Register notice, to grant the designation under Section 17A of the Securities Exchange Act of 1934. The registration introduces direct structural competition into a U.S. equities clearing space that has been entirely controlled by the Depository Trust & Clearing Corporation (DTCC) and its subsidiary, the NSCC, for nearly half a century.
The official SEC approval validates a seven-year regulatory campaign by Paxos, which initially began with a No-Action Letter issued in 2019 to test the viability of blockchain-based settlement frameworks.
To secure this registration, Paxos operated a live settlement pilot program between February 2020 and late 2021. During this period, the firm processed daily U.S. equity trades for major institutional clients, including Credit Suisse, Instinet, and Société Générale. The pilot was designed to prove that decentralized ledger infrastructure could handle the strict operational demands of regulated equity markets.
PSSC is now authorized to process delivery-versus-payment (DVP) transactions directly on blockchain rails. This capability allows the network to bypass traditional batch processing and execute immediate, or T+0, settlement for eligible institutional securities at scale.
How T+0 Blockchain Settlement Affects Institutional Capital Requirements
The introduction of a second clearing agency fundamentally alters the capital efficiency of U.S. equity markets. Traditional T+2 settlement cycles require broker-dealers to post significant margin to the NSCC to cover counterparty risk during the waiting period between trade execution and final settlement.
By moving eligible transactions to a T+0 blockchain framework, PSSC eliminates this overnight counterparty risk. Institutions executing trades through Paxos will immediately exchange assets for payment, freeing up capital that would otherwise remain locked in margin accounts under the legacy DTCC system. The ability to deploy that capital intra-day gives participating broker-dealers a direct liquidity advantage.