Circle and Paxos Team to Help Verify Crypto Payments

Circle and Paxos Trust reportedly devised a way to help companies verify digital asset holdings.

The two firms are working with Bluprynt, a FinTech startup founded by Georgetown Law School professor Chris Brummer, Bloomberg reported Wednesday (Aug. 27). They are employing cryptography and blockchain technology to offer issuer verification once stablecoins are released by a company.

A pilot provided a way to trace a token back to the verified issuer with the help of Bluprynt’s technology, the report said.

That technology gives “provenance upfront, reducing complexity, and providing regulators and investors with the transparency they need,” said Brummer, per the report, adding that this could help offset losses from counterfeit tokens and impersonation attacks. It could also benefit auditors, financial crime fighters and investors.

The partnership represents the way parts of the digital asset industry are maturing as they look to follow new regulatory requirements being established around the world, according to the report.

For example, the United States in July passed the GENIUS Act, the first legislation governing stablecoins, which are digital tokens pegged to non-volatile assets like the U.S. dollar.

Blockchain analysis firms such as Chainalysis have said stablecoins face distinct security risks depending on how they are handled, per the report. The company said in June that impersonation and fake stablecoins are a common risk.

Also Wednesday, Circle launched a partnership with Finastra to help banks integrate stablecoin settlement into cross-border payment flows. The collaboration will employ Finastra’s payment hub solutions to connect financial institutions to Circle’s payment infrastructure, permitting settlement in Circle’s USDC stablecoin, regardless of whether payment instructions on both sides are still in fiat currency.

Meanwhile, there are difficulties involved in integrating stablecoins into the financial system. In traditional banking, dollars are fungible from institution to institution through clearinghouses, payment networks and regulatory frameworks that uphold consistency. A dollar at one bank is the same as a dollar at another, and payments between them clear through established rails.

“Stablecoins lack that universality,” PYMNTS reported Wednesday. “The same ‘brand’ of stablecoin can behave differently depending on the chain it resides on. Without common rails, treasurers must effectively treat each version of the token as a distinct asset. Accounting for these variations, integrating them into ERP systems, and managing liquidity across chains all require layers of middleware that are still immature.”