Paxos Unveils 5% Yield Stablecoin USDL

Paxos has introduced the Lift Dollar (USDL) stablecoin, offering holders a “risk-free” yield of approximately 5%.

The issuer of this “stablecoin,” Paxos International, is regulated in the UAE by the Financial Services Regulatory Authority (FSRA) within the Abu Dhabi Global Market (ADGM).

The token is not intended for residents of the US, UAE (except ADGM), UK, EU, Canada, Hong Kong, Japan, and Singapore.

Paxos is also the issuer of PayPal USD (PYUSD), Pax Dollar (USDP), and Pax Gold (PAXG).

The initial market for USDL will be Argentina, known for its persistent currency depreciation and high inflation.

Local platforms Ripio, Buenbit, Manteca, and Plus Crypto will handle the distribution of the new asset.

“Stablecoins are inherently designed to help those who are unbanked and lack access to dollars for a variety of reasons,” said Paxos CEO Charles Cascarilla in a conversation with The Block.

The executive explained that Lift Dollar will target such audiences globally for future launches.

Company’s Head of Product Ronak Daya revealed plans to capture a significant portion of the future growth in the “stablecoin” market by taking share from existing players. He estimates that the capitalization of stablecoins will increase 20-fold.

Daya explained that Paxos International will charge a distribution fee of 20 basis points and an issuer fee of 30 basis points, paying users the remaining yield. According to the executive, the firm will initially waive the second component of the fees.

“USDL is publicly available on Ethereum and programmatically pays rewards to token holders daily, provided that the total value of stablecoins in circulation is fully backed by reserve assets,” the statement reads.

Lift Dollar is backed by USD at a 1:1 ratio. The backing consists of “only the highest quality liquid assets” such as US dollar deposits, short-term US Treasury obligations, and cash equivalents.

Cascarilla assured that Paxos International is solely focused on issuing stablecoins. A hypothetical bankruptcy of Paxos would not involve the UAE subsidiary in bankruptcy proceedings.

In June, the total market value of Ethena Labs’ yield-bearing USDe surpassed $3 billion four months after its launch.

In 2023, two projects offering passive income from token backing emerged in the stablecoin market: USDM from Mountain Protocol and USDY from Ondo Finance.