Paxos Launches Paxos Labs to Bridge DeFi and Institutional Finance

Paxos, a leading blockchain infrastructure platform, has introduced a new venture called Paxos Labs. This initiative is designed to facilitate the integration of decentralized finance (DeFi) and on-chain products directly into institutional applications. The startup aims to bridge the gap between traditional financial institutions and the burgeoning DeFi ecosystem, enabling these institutions to offer DeFi products to their clients seamlessly.

Paxos Labs will provide the necessary tools and infrastructure for institutions to incorporate DeFi solutions into their existing systems. This move is significant as it addresses the growing demand from institutional investors for access to DeFi products, which offer higher yields and more innovative financial instruments compared to traditional offerings. By leveraging Paxos' expertise in blockchain technology and regulatory compliance, Paxos Labs seeks to make DeFi more accessible and secure for institutional players.

The launch of Paxos Labs comes at a time when the DeFi sector is experiencing rapid growth and increasing interest from institutional investors. However, the complexity and regulatory challenges associated with DeFi have been barriers to widespread adoption. Paxos Labs aims to overcome these hurdles by providing a user-friendly platform that complies with regulatory requirements, thereby reducing the risks and complexities involved in integrating DeFi solutions.

Paxos Labs' focus on institutional applications is a strategic move that aligns with the broader trend of institutional adoption of blockchain and DeFi technologies. As more institutions look to diversify their investment portfolios and explore new revenue streams, the demand for reliable and compliant DeFi solutions is expected to rise. Paxos Labs is well-positioned to meet this demand, given its strong track record in the blockchain industry and its commitment to regulatory compliance.

Paxos Labs was incubated inside Paxos over the past six months as demand has grown from companies looking to connect with DeFi markets and real-world asset opportunities. The startup is building easy-to-integrate APIs that enable customers to integrate DeFi products without internalizing the complexity of DeFi. Paxos Labs' initial offerings include tools for issuing custom-branded stablecoins, deploying tokenized yield strategies, and managing structured digital assets. The startup is primarily targeting consumer fintech apps, exchanges, and blockchain networks as customers.

For example, suppose a fintech platform wants to issue its own branded stablecoin or offer users a dollar-denominated product that earns passive yield without requiring them to interact directly with DeFi. In that case, Paxos Labs can provide the infrastructure to support that. Similarly, a Layer 1 network or DeFi protocol looking to offer native bitcoin or ether yield products to improve capital retention and user engagement can use Paxos Labs' APIs to build and launch those features.

Paxos Labs will support products that integrate on partner platforms and enable partners to brand these products, such as 'Earn on USD', 'Earn on ETH', 'Earn on BTC'. For branded stablecoins, institutions can tokenize fiat or stablecoin collateral into a custom-branded asset backed by reserves such as Global Dollar (USDG), issued by Paxos Digital Singapore; Lift Dollar (USDL), issued by Paxos International; or PayPal USD (PYUSD), issued by Paxos Trust Company on behalf of PayPal. Paxos Labs will work with multiple asset issuers to back custom stablecoins, not just Paxos.

Paxos Labs is entering a growing field of companies offering infrastructure for institutional access to DeFi. But unlike firms such as Fireblocks, Anchorage, or Galaxy Digital — which focus on custody or direct access to DeFi protocols — Paxos Labs provides APIs and infrastructure for platforms to offer onchain products to their end users. Paxos Labs is focused on enabling embedded experiences for platforms to expose to their end users. The goal is to make Paxos Labs the default infrastructure layer for onchain financial products across the world.

Over the next 12 to 18 months, Paxos Labs aims to become a one-stop shop for institutions looking to integrate onchain products into their platforms to grow their user engagement, retention, and monetization. Paxos Labs currently has a team of more than a dozen employees with backgrounds in financial services and crypto. The company plans to expand in the future, with a focus on hiring in engineering and marketing. The co-founders of the startup are Bhau Kotecha, co-founder and head of Paxos Labs, alongside Paxos CEO Charles "Chad" Cascarilla.