Privacy-preserving USAD stablecoin launches on Aleo Layer 1 mainnet via Paxos partnership

Privacy-focused Layer 1 network Aleo is launching a native stablecoin for its ZK-powered chain through a partnership with Paxos Labs. 

The move comes amid a wave of interest in institutional-grade privacy solutions as businesses look to leverage the advantages of blockchain-based assets without sacrificing certain business details by transacting on fully transparent payment rails. 

Notably, rival stablecoin issuer Circle also tapped Aleo to pilot a privacy-preserving version of its flagship USDC token, called USDCx. 

“Working with Aleo, we are bringing digital dollars into an environment where privacy and programmability are built in from the start, giving enterprises a way to embed money they can trust,” Paxos Labs co-founder Bhau Kotecha said. “As stablecoins continue to impact traditional financial rails, we anticipate more organizations will look to deploy their own custom assets that provide additional value to their platforms, something that Aleo and its team are already ahead of the curve on.”

USAD will support traditional stablecoin use cases, like payments, as well as other “programmable use cases that are difficult to support on fully transparent blockchains,” the team said. Aleo COO Leena Im noted the regulated stablecoin is designed using Paxos’ issuance infrastructure to meet “oversight requirements while still protecting sensitive user information.”

Aleo uses zero-knowledge cryptography to provide private-by-default end-to-end encryption that hides sensitive details like participant identities, wallet addresses, and transaction amounts from public view, while maintaining auditability. USAD’s website highlights applications like discreet payroll, B2B payments, and anonymous DeFi.

The stablecoin will be backed by cash and cash equivalents managed by Paxos. 

In addition to issuing stablecoins for the likes of PayPal and, previously, Binance, Paxos also plays a significant role in the Global Dollar (USDG) stablecoin, supported by a consortium of businesses including Anchorage Digital, Bullish, Kraken, OKX, Robinhood, and World.

Aleo launched on mainnet in September 2024 after several years of development.

The L1 project raised a $200 million at a valuation of $1.45 billion in a 2022 Series B co-led by SoftBank's Vision Fund 2 and Kora Management, and has also been backed by a16z, Softbank, Coinbase Ventures, Samsung Next, Tiger Global, and other notable investors.