Paxos launches new startup to help institutions offer DeFi products

Paxos has launched a new startup called Paxos Labs to help institutions bring decentralized finance and onchain products directly into their apps and platforms.

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, Bhau Kotecha, co-founder and head of Paxos Labs, told The Block.

"Paxos Labs is building easy to integrate APIs that enable customers to integrate DeFi products without internalizing the complexity of DeFi," Kotecha said.

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, Kotecha said.

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'," Kotecha said. 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, Kotecha said. "However, Paxos Labs draws on Paxos' regulatory expertise, enterprise-grade infrastructure and deep experience building safe and compliant financial systems," he added.

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," Kotecha said. "Our 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, according to Kotecha.

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. Kotecha is one of the co-founders of the startup, alongside Paxos CEO Charles "Chad" Cascarilla.