Paxos Trust Company LLC has made a significant move in the cryptocurrency sector by acquiring Fordefi Inc., a startup specializing in a crypto wallet platform used by over 200 institutional investors. The deal, reported by Fortune on March 12, 2024, is valued at more than $100 million, representing a premium over Fordefi’s estimated valuation of $83 million following its latest funding round last year, in which Paxos was a participant.
Based in New York, Paxos is recognized for its software that allows companies to issue stablecoins. In 2023, the company entered into a partnership with PayPal Holdings Inc. to develop the PYUSD token, further solidifying its position in the digital currency market. Paxos has issued two stablecoins, both pegged to the U.S. dollar and gold, and has secured over $500 million in funding. Its diverse range of digital asset management services includes solutions that enable users to convert rewards program points into cryptocurrency and allow fintech companies to integrate a digital wallet into their applications.
Enhancing Security and Functionality
The acquisition of Fordefi will bolster Paxos’ capabilities, particularly in the area of digital wallet technology. Fordefi’s platform supports developers in equipping their applications with a multi-party computation (MCP) wallet. This cybersecurity technique protects crypto assets from theft by requiring multiple encryption keys stored on different devices to authorize transactions. If a device is lost, Fordefi’s platform can restore the encryption keys stored on that device, enhancing user security.
Additionally, Fordefi offers a transaction simulation tool that allows users to model crypto transactions before execution, helping to identify potential issues in advance. This feature is beneficial not only for consumer-focused digital wallets but also for institutional trading. Fund managers can utilize the transaction simulator to review large trades prior to approval, a capability Paxos aims to leverage to improve its offerings for institutional clients.
Fordefi will continue to operate its platform independently in the near future. Over time, Paxos plans to integrate Fordefi’s technology into its existing infrastructure. Josh Schwartz, co-founder and Chief Executive Officer of Fordefi, emphasized the advantages of the acquisition, stating, “Joining Paxos allows us to bring our technology to an even broader audience while maintaining our focus on security, usability, and innovation.”
Strategic Expansion in Digital Assets
This acquisition follows Paxos’ previous purchase of Finland-based stablecoin company Membrane Finance in February 2023, a strategic move that enabled the company to offer one of its stablecoins within the European Union. As Paxos continues to expand its footprint in the digital asset landscape, the integration of Fordefi’s technology is expected to enhance its service offerings and support the growing demand for secure digital transactions.
The acquisition not only signifies Paxos’ commitment to expanding its technological capabilities but also highlights the increasing importance of cybersecurity in the cryptocurrency market. As digital assets continue to evolve, partnerships and acquisitions like this one are likely to play a crucial role in shaping the future of finance.