Paxos Labs and Aleo Network Foundation to Launch U.S. Stablecoin

The Aleo Network Foundation, the non-profit organization that supports the Aleo Network, has partnered with Paxos Labs to launch USAD, a U.S. dollar stablecoin.

USAD will be a dollar-backed stablecoin issued on a Layer 1 blockchain with a focus on privacy, according to a press release viewed by The Defiant. A key feature is the use of Aleo’s zero-knowledge cryptography to enable end-to-end encrypted transactions.

Paxos Labs – which is the issuer of several stablecoins, including PayPal’s PYUSD and Global Dollar (USDG) – will provide the issuance and reserve management infrastructure. The company has raised $535 million from investors such as RRE Ventures, Liberty City Ventures and Coinbase, and is valued at $2.4 billion, according to Traxcn.

The organizations said the model aims to address a gap in current stablecoin systems, which typically make all transaction data publicly visible on-chain. By encrypting transactions, USAD aims to promote broader institutional adoption of blockchain-based payment systems.

“Privacy is the missing link in blockchain adoption at scale, and with USAD, we are proving it can exist in a programmable stablecoin,” said Leena Im, COO at the Aleo Network Foundation. “By pairing Aleo’s technology with Paxos Labs’ issuance stack, we are taking a joint, front-door approach with enterprises to show that digital dollars can be both trusted and transparent to oversight while protecting user confidentiality.”

Stablecoins have become a major driver of on-chain finance in recent years, recording more than $268.6 trillion in cumulative transaction volume since 2019, according to Visa. That growth has only accelerated in 2025 following the passage of the GENIUS Act in July, which introduced federal rules for issuance and oversight.

The sector’s total market capitalization now stands at over $297 billion, per DeFiLlama. Tether’s USDT maintains a nearly 59% market share with a market capitalization of $174.5 billion.

“Stablecoins have proven to be one of the most powerful innovations in financial markets, and we are only scratching the surface of their potential,” said Bhau Kotecha, co-founder at Paxos Labs. “Partnering with Aleo allows us to bring digital dollars into a new era where enterprises can embed money that is private, programmable, and trusted from the ground up.”

The move comes amid a broader trend of new stablecoins entering a crowded market. Last week, Hyperliquid launched USDH via Native Markets, and earlier this month, Tether announced USAT, its U.S.-focused stablecoin.