Paxos International launches yield-bearing stablecoin Lift Dollar (USDL)

Paxos International, a UAE-based entity of Paxos, has launched a yield-bearing stablecoin called Lift dollar (USDL), with Argentina as its first market.

"USDL is issued permissionlessly on Ethereum and pays yield programmatically on a daily basis to token holders, subject to the reserve assets fully backing the total value of USDL in circulation," Paxos International said Wednesday.

USDL is one-to-one backed with the U.S. dollar, holds "only the highest-quality liquid assets" such as U.S. dollar deposits, short-duration U.S. treasuries, and cash equivalents, and is regulated by the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM), Paxos International said.

With USDL, users can earn "really the risk-free" return, Charles "Chad" Cascarilla, member of the board of directors of Paxos International and co-founder and CEO of Paxos, told The Block in an interview. Paxos International is a "ring-fenced entity" that does not do anything else besides issuing the stablecoin, Cascarilla said, noting that "if anything happened to Paxos, the assets are not part of some bankruptcy process. They are immediately returned to investors."

USDL first launching in Argentina

Paxos International is first launching the USDL stablecoin in Argentina via crypto platforms Ripio, Buenbit, and TiendaCrypto as its distribution partners.

Users can currently earn about 5% yield on USDL, close to the current effective federal funds rate or EFFR, Ronak Daya, head of product at Paxos, told The Block in the interview. Paxos International uses the rebasing technique to distribute yield, and Daya said users' USDL holdings will increase daily with the yield.

Paxos International will charge a 20 basis points distribution fee and a 30 basis points issuer fee and pay out the remaining yield earned to users, Daya said, noting that the entity will forego its issuer fee during the initial promotion period of USDL.

USDL not available in the US and some other jurisdictions

USDL isn't available to residents of certain jurisdictions, including the U.S., the UAE except ADGM, the UK, the European Union, Canada, Hong Kong, Japan, and Singapore. Cascarilla said a yield-bearing stablecoin could be seen as a security by the U.S. Securities and Exchange Commission, which is why Paxos, the main entity, doesn't offer yield on its existing stablecoin products such as pax dollar or USDP.

"Stablecoins inherently are about helping those people who are unbanked or underbanked, who don't have access to dollars, for a number of different reasons," Cascarilla said, noting that USDL will target such audience globally for future launches.

"We believe that the stablecoin market will 20X from now over the next five years, and we believe that we'll be able to capture a large portion of the future growth and take market share from existing incumbents," Daya said.