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Highlights
- USDL offers a 5% yield, comparable to current EFFR, backed by U.S. Treasuries.
- Paxos International launches USDL in Argentina, not available in the US or EU.
- USDL stablecoin regulated by FSRA of ADGM, ensuring high security standards.
Paxos International, a branch of Paxos based in the United Arab Emirates, has introduced a new yield-bearing stablecoin named Lift Dollar (USDL).
Designed to offer a risk-free return to its owners, the stablecoin has been launched in Argentina with an intention to expand in more countries in the future. However, there’s a caveat: Residents of several countries including the United States cannot use USDL due to legal restrictions.
Overview of Lift Dollar (USDL)
USDL is built on the Ethereum blockchain, allowing for unrestricted creation and providing daily payouts to token holders. Each USDL token is fully collateralized at a ratio of one to one by the U.S dollar and is also secured by the cash assets such as the U.S dollar deposits and the short term U.S treasury notes.
Paxos International also underlined that the management of the stablecoin’s reserves is intended to maintain the reserve sufficient to support the total USDL in circulation, thus confirming its investors’ trust.
Introducing Lift Dollar ($USDL), a US dollar-backed stablecoin with regulatory oversight that democratizes access to US dollars, allowing you to safely earn yield on-chain.
1/8 pic.twitter.com/VYOxN6gruu
— Lift Dollar (@LiftDollar_USDL) June 5, 2024
It is regulated by the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Monetary (ADGM) to meet high regulatory standards. This development is designed to provide a safe and reliable framework for USDL owners that is independent of the financial activities and potential risks of Paxos.
Yield Generation and Fees
USDL provides its holders with a return rate of around 5%, which is rather close to the present EFFR. The yield is derived from investments in U.S. Treasury bills and other cash instruments and paid to investors on a rebase basis. This process takes place on a daily basis, and it changes the token balances of each participant according to the yield that has been earned.
Paxos International has set a distribution fee of 20 basis points and an issuer fee of 30 basis points to manage USDL’s operations.
However, the issuer fee will be exempted in the first few months of the launch to popularize it among the users. The fee structure is quite simple and is intended to help users understand the expenses of holding USDL.
Market Strategy and Accessibility
Nonetheless, the use of the Lift Dollar comes with some advantages, but it is not available in most countries such as the United States, the United Arab Emirates (excluding ADGM), the United Kingdom, the European Union, Canada, Hong Kong, Japan, and Singapore.
These limitations stem from the possibility of the yield-bearing stablecoins falling under the securities category as per the U.S Securities and Exchange Commission. This is a major drawback as Paxos seeks to expand its operations and market reach on the global stage.
Nevertheless, Paxos remains quite positive about the future of the stablecoin market and thinks that this market is going to grow fivefold in the next five years. They believe that USDL will be useful in offering the unbanked and underbanked populations a chance to access the U.S dollars, which is in line with their overall goal of financial inclusion.
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