Key Takeaways
- Coinbase is launching a new white label stablecoin solution.
- The announcement brings Coinbase into direct competition with Paxos.
- Both firms are pursuing regulatory approvals that could give them an edge.
As part of a slate of new product launches, on Thursday, Dec. 18, Coinbase unveiled a new service that lets clients create their own custom-branded stablecoins.
The announcement poses a direct threat to Paxos, which faces a heavyweight new competitor in the market for white-label stablecoin solutions.
White Label Stablecoins
When Binance was planning to launch a stablecoin in 2018–2019, rather than building one from scratch, it sought out a partner that could handle the technical and regulatory back-end.
The firm eventually landed on Paxos, whose PAX digital dollar (USDP) was one of the top three stablecoins in the pre-USDC era.
With its trust charter from New York’s banking regulator, Paxos offered a degree of credibility that offshore issuers like Tether and Techteryx lacked.
Once the company secured Binance as a customer, the resulting stablecoin—BUSD—quickly eclipsed USDP and established a new and lucrative business line for Paxos.
After BUSD was phased out in 2022–2023, it didn’t take long for the stablecoin issuer to find a new partner in PayPal.
Like Binance before it, PayPal benefits from Paxos’ trust charter, with the Office of the Comptroller of the Currency (OCC) recently approving its elevation to a national charter.
Meanwhile, the payment firm retains control over how PYUSD is used and distributed, and gets to keep a portion of the yield generated by its reserves.
Coinbase Takes on Paxos With New Stablecoin Solution
At launch, Coinbase isn’t positioning its new stablecoin solution at the enterprise level that Paxos specializes in.
The first customers it has onboarded include Flipcash, Solflare, and R2—small fintechs whose stablecoins are unlikely to amass significant market capitalization any time soon.
In the long run, however, Coinbase is in a strong position to take on Paxos on its home turf.
The crypto exchange was Circle’s initial partner for USDC, and it continues to play a key role in distributing the stablecoin.
Given its extensive regulatory framework and significant presence in Washington, Coinbase benefits from increased federal oversight following the passage of the GENIUS Act, which has diminished New York’s role as a regulatory leader.
Moreover, where New York once stood at the vanguard of U.S. crypto regulation, the GENIUS Act has centralized stablecoin oversight under federal authorities.
Given its extensive regulatory framework and significant presence in Washington, this change is particularly beneficial for Coinbase.
Handling Reserves
For now, Paxos has an important edge.
Anticipating the GENIUS Act’s licensing requirements, stablecoins issued via Coinbase’s white label solution will use USDC as collateral, with the firm presumably leveraging its revenue-sharing agreement with Circle to pass Treasury yields on to its partners.
This model is inevitably inefficient and will increase costs for users.
However, after applying for a national trust charter from the OCC in October, Coinbase may soon be able to custody reserves directly, removing the need for USDC as an intermediary asset and significantly enhancing the firm’s white-label offering.
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James Morales is CCN’s blockchain and crypto policy reporter. He has been working in the news media since 2020, writing about topics such as payments, banking and financial technology. These days, he likes to explore the latest blockchain innovations and the evolving landscape of global crypto regulation.
With an educational background in social anthropology and media studies, James uses his platform as a journalist to explore how new technologies work, why they matter and how they might shape our future.
