This interview is about how blockchain can fix the financial system. Paxos founder Cascarilla thinks the current system is unsustainable due to high debt and low population growth, and open money (blockchain) is the solution. He's conditionally bullish on Bitcoin, saying its risk-adjusted return improves as it survives longer. He also highlights PAX Gold (a token redeemable for physical gold) and PAX stablecoin (dollar on the blockchain). His investment strategy: a barbell of 'outside assets' like gold and Bitcoin on one end, and early-stage startups on the other, avoiding public stocks.
Paxos CEO and co-founder Chad Cascarilla discussed the integration of blockchain with traditional financial systems on the program Invest Like the Best. The core argument is that blockchain technology can reshape financial services through an open money system, addressing the inefficiencies of curre
Paxos CEO and co-founder Chad Cascarilla (former founder of Cedar Hill Capital Partners) discussed on the program how blockchain can reshape the traditional financial system. Drawing from his firsthand experience during the 2008 subprime mortgage crisis, he argues that blockchain can address the core pain points of the current financial system—"unclear asset ownership and slow settlement." Cascarilla asserts: with global debt-to-GDP approaching 300%, combined with negative interest rates and population decline, the current closed fiat currency system is becoming unsustainable, and an open money system will inevitably emerge as the alternative.
Cascarilla argues that the root cause of the 2008 crisis was not merely excessive leverage, but the failure of the financial system's "plumbing" — asset movement was far too slow to keep pace with trading demand.
Implication: Cascarilla believes that blockchain enables instant and deterministic settlement of assets, fundamentally eliminating the risk of "not knowing who owns what, or when." This is the core philosophy behind the founding of Paxos.
Cascarilla argues that the current financial system is "closed": all U.S. dollar balances are stored on the New York Fed's COBOL mainframe, accessible only to roughly 3,000 member banks; all stocks and bonds are held at the Depository Trust Company (DTC), with only a few hundred members able to access the ledger. Ordinary individuals must go through intermediaries to hold or transfer assets.
Data support: The financial services sector's market cap share in the S&P 500 has fallen from roughly 30% in 2000 to about 15% today, reflecting a structural decline in returns (low interest rates + high capital requirements).
Cascarilla argues that the global debt-to-GDP ratio approaching 300%, the spread of negative interest rates, and slowing or even declining population growth make the current system unsustainable. He proposes three possible outcomes:
1. Debt Deflation (Debt Forgiveness): Actively compressing debt, but facing enormous political resistance.
2. Inflation (Most Likely Path): Continuously printing money to dilute debt; the Fed has already launched $500 billion in quantitative easing under the guise of "not calling it QE."
3. Socialization: Strengthening regulation and controls, though the system has "antibodies" that resist it.
Investment Strategy: He recommends a "barbell strategy" – holding "outside assets" (assets that are not someone else's liabilities, such as gold, Bitcoin, and real estate) on one end, and a portfolio of early-stage startups with "call option" characteristics on the other (8 out of 10 will fail, but the right combination yields substantial returns). For the middle part (public market equities), he believes they are "priced fairly reasonably," making it difficult to find mispricing opportunities.
On Bitcoin: Cascarilla first encountered Bitcoin in May 2010 through the Elliott Wave Newsletter (then priced at 3–4 cents) and once mined it using an office computer (at one point accounting for 20–25% of the network's total hashrate). He holds a "conditionally bullish" view on Bitcoin:
Paxos’s core positioning is as “market infrastructure for an open financial system” — leveraging a trust company license (approved in 2015 by the New York State Department of Financial Services) to tokenize physical assets, enabling 7×24 instant, low-cost transfers.
PAX Gold (PAXG):
Stablecoin (PAX):
Key Data: Global total assets amount to approximately $600 trillion, and Cascarilla predicts that over the next 20–25 years, these assets will gradually migrate to blockchain (public or private chains).
Cascarilla distinguishes the applicable scenarios for public and private chains, arguing that the migration will be a gradual process:
Current challenges: Tokenizing public securities (stocks, bonds) and real estate. The former faces complex regulatory hurdles (involving assets over $100 trillion), while the latter involves procedural issues (title insurance, numerous intermediaries, high transaction costs). He believes that securities tokenization faces greater regulatory difficulty, whereas real estate tokenization faces greater procedural difficulty.
| Position | Guest Stance | Key Data |
|---|---|---|
| Bitcoin | Bullish (conditional) | First exposure at 3-4 cents in March 2010; current market cap ~$150 billion; Bitcoin dominance rose from 25-30% in early 2018 to ~69% currently |
| PAX Gold (PAXG) | Bullish (product) | 1 ounce corresponds to physical gold bars in London Brinks vaults; no custody fees; divisible to 8 decimal places |
| PAX Stablecoin | Bullish (product) | On-chain dollar tokenization scale ~$5 billion vs. M2 ~$15 trillion |
| Gold | Bullish (as external asset) | Global gold market cap ~$8 trillion |
| Ethereum | Neutral (as record ledger) | Currently unable to support $30 trillion in U.S. equities |
| Coinbase, Binance, Bakkt, Fidelity | Not explicitly stated | Mentioned as industry infrastructure participants |
1. “The problem in the financial system is not leverage, but plumbing—the speed at which assets move cannot keep up with transaction demand.” (Cascarilla)—During the subprime crisis, collateral could not be delivered in time due to slow settlement, leading to cascading defaults; blockchain enables instant, deterministic settlement.
2. “Bitcoin’s risk-adjusted returns improve as its price rises—the higher the price, the lower the risk.” (Cascarilla)—Contrary to traditional assets, because each additional day it does not go to zero reduces its “extremely high discount rate.”
3. “Global debt-to-GDP is approaching 300%, combined with negative rates and demographic decline—the current system is ‘drinking more to avoid a hangover.’” (Cascarilla)—Debt is “spending tomorrow’s money today,” and continuous money printing merely delays the reckoning, which may ultimately be resolved through inflation.
4. “The financial industry is shifting from ‘service’ to ‘product’—from human-dependent to software-driven, with order-of-magnitude cost reductions.” (Cascarilla)—Analogous to Amazon vs. Walmart, Robinhood vs. traditional brokers; large traditional banks struggle to transform due to organizational rigidity.
5. “Gold is a ‘public ledger’—it is worth $8 trillion only because we say it is.” (Cascarilla)—Bitcoin, as a native digital asset, could become a better “public ledger” than gold, but its code is still in beta stage.
6. “PAX Gold solves gold’s fundamental contradiction: you either hold physical gold (untradeable) or synthetic gold (non-redeemable for physical).” (Cascarilla)—Tokenized gold combines physical ownership with the liquidity and divisibility of digital assets.
7. “Bitcoin dominance rose from 25% to 69%—this is the healthiest signal: after all altcoins were tested, none proved to be better.” (Cascarilla)—The “crypto winter” since 2018 has eliminated a large number of protocols, and Bitcoin has withstood the test.
8. “The investment strategy should be a barbell: one end is external assets (gold, Bitcoin, real estate), the other end is call options on early-stage startups.” (Cascarilla)—The middle part (public markets) is fairly priced, making it difficult to find mispricing opportunities.