New Partnership Designed to Securely Track Precious Metal Trades
Financial technology firm Paxos has formed a partnership with INTL FCStone Inc’s precious metals division. The department will now be using Paxos Confirmation Service — a tool built specifically for the precious metals arena — to instantly automate daily trade confirmations and reduce human error.
Paxos seeks to unlock capital and create value with products that eliminate trade risk, while INTL FCStone provides market intelligence, post-trade services and financial services execution throughout the global financial market. The company boasts over 20,000 customers in approximately 130 different countries and is headquartered in New York City.
Chad Cascarilla is the CEO and co-founder of Paxos. Speaking with Bitcoin Magazine, he said that the precious metals industry is prone to many of the same issues one finds with traditional banking institutions.
“Many of the processes that the precious metals industry uses today to confirm and settle trades are manual and prone to human error,” he explained. “Today, confirmations, metal transfer instructions and wire instructions are sent via email, which is notoriously bad for information security. Email is rarely encrypted, and a simple keystroke error can cause an email to be sent to the wrong recipients, so information is very vulnerable.”
He further stated that the timeframe in which precious metals move or transfer is usually not quick enough. Thus, they’re often at risk of getting lost or falling into the wrong hands:
“Imagine buying something online when the seller uses eBay to negotiate a price and ship the products, but the buyer wants to pay on Venmo. When using different systems, there is no guarantee that the goods and payment will occur between the same parties and within the expected period. Now, imagine this situation for a $50 million trade for gold. This simple conundrum of ‘who pays first and who bears risk’ is a big issue for the precious metals industry.”
Using the Paxos system, INTL FCStone can match trade economics within seconds, thus eliminating several manual tasks and improving operational precision. Trades are quickly captured, and if issues ever arise, they are quickly identified and resolved.
While Paxos is known for its expertise in the blockchain arena, Seth M. Phillips, executive director of Bankchain Precious Metals, explained that blockchain technology is not what’s behind the company’s confirmation service.
“This is the first stage in a broader post-trade platform that Paxos has build for the precious metals space, and latter stages will utilize blockchain,” he said.
“This service is for confirming trades; we will be releasing products in the future that will help with further steps of post-trade processes, including settlement via blockchain.”
Cascarilla further believes Paxos’ technology will be developed to the point that it can be applied to virtually every financial space.
“Our mission is to move any asset, anywhere, in a trusted way,” he said. “We already work with many financial institutions and banks who use our solutions for crypto assets, and this is our first foray into precious metals. We have many more solutions in development for other asset classes including commodities and FX, and we hope to reduce settlement risks and achieve symmetry and synchrony in a highly fragmented world.”
He said that Paxos will be phasing the rollout of the confirmation service to around 75 counterparty pairs in the coming months.