USAD is a U.S. dollar-pegged stablecoin launched on October 1, 2025, through a partnership between Paxos Labs and The Aleo Network Foundation. It operates on the Aleo Layer 1 blockchain and is designed to provide private, programmable, and end-to-end encrypted transactions, primarily targeting institutional and enterprise users who require confidentiality for on-chain financial activities. ^{[1] [2]}

Overview

USAD was developed to address a significant barrier to the institutional adoption of blockchain technology: the lack of privacy on public ledgers. Conventional stablecoins, such as Tether (USDT) and USD Coin (USDC), record all transaction details transparently, exposing sensitive information like wallet addresses and transfer amounts. This transparency is often unacceptable for businesses and financial institutions operating in competitive environments. USAD aims to solve this by integrating the zero-knowledge cryptography native to the Aleo network with the regulated stablecoin issuance framework of Paxos Labs. ^{[3] [1]}

The project's core value proposition is to offer a digital dollar that is both trusted and programmable while protecting user data. It seeks to create a balance between confidentiality for users and the necessary transparency for regulatory oversight. This is achieved through technological features that allow for selective disclosure of transaction information to authorized parties, such as auditors or regulators, without compromising the default state of privacy. The stablecoin is intended to function as a foundational element for a new era of private on-chain finance for enterprises. ^{[4] [2]}

Leena Im, Chief Operating Officer of The Aleo Network Foundation, stated, "Privacy is the missing link in blockchain adoption at scale, and with USAD we are proving it can exist in a programmable stablecoin. 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." ^[1]

Bhau Kotecha, co-founder of Paxos Labs, added, "Stablecoins have proven to be one of the most powerful innovations in financial markets, and we are only scratching the surface of their potential. 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." ^[2]

History

The development and launch of USAD occurred within a rapidly evolving regulatory and market landscape for stablecoins. A key legislative event preceding the announcement was the passage of the U.S. GENIUS Act in July 2025. This act established a federal regulatory framework for the issuance and oversight of payment stablecoins, providing greater clarity for projects like USAD. ^{[2] [3]}

On October 1, 2025, The Aleo Network Foundation and Paxos Labs officially announced their partnership and the launch of the USAD stablecoin. The announcement positioned the project as a direct response to the demand from institutional clients for a stablecoin that could ensure the confidentiality of their financial operations on a blockchain. ^{[4] [1]}

Technology

USAD's functionality is built upon the combination of Aleo's privacy-preserving blockchain and Paxos Labs' stablecoin infrastructure.

Blockchain Infrastructure

USAD is issued natively on the Aleo Network, a Layer 1 blockchain specifically designed for building private, scalable applications. Unlike transparent blockchains such as Ethereum, Aleo's architecture is built from the ground up to support zero-knowledge cryptography, enabling developers to create decentralized applications that offer privacy by default. ^{[1] [2]}

Privacy Mechanism

The core privacy feature of USAD is its use of zero-knowledge (ZK) proofs. This cryptographic technique allows for the verification of transactions without revealing any of the underlying data. For USAD transactions, this means that critical details are encrypted and shielded from public view on the blockchain, including:

• Sender and receiver wallet addresses
• Transaction amounts

This end-to-end encryption ensures that while the integrity of the transaction can be mathematically proven and validated by the network, the sensitive financial data remains confidential. This mechanism is a key differentiator from other major stablecoins that operate on public, transparent ledgers. ^{[1] [3]}

Compliance Features

To address regulatory requirements while maintaining user privacy, USAD incorporates a feature known as "selective disclosure." This privacy-preserving compliance tool allows users to grant viewing permissions for their transaction history to specific, authorized third parties, such as auditors or regulatory bodies. This functionality is designed to help institutions meet Know Your Customer (KYC) and Anti-Money Laundering (AML) obligations without having to expose their financial activities on a public ledger. The system aims to provide a compliant pathway for institutional finance on the blockchain. ^[3]

Partnerships and Key Entities

The creation of USAD is the result of a strategic collaboration between two key organizations in the blockchain and digital asset space.

Paxos Labs

Paxos Labs is the entity responsible for the issuance and management of USAD. It is a startup launched in 2025 that was incubated by its parent company, Paxos. Paxos is a regulated financial technology company and blockchain infrastructure platform known for issuing other prominent stablecoins, including PayPal USD (PYUSD) and the Global Dollar (USDG). Paxos Labs provides the enterprise-grade framework for stablecoin issuance, ensuring that USAD is backed by corresponding U.S. dollar reserves. The co-founder of Paxos Labs is Bhau Kotecha. ^{[1] [2]}

The Aleo Network Foundation

The Aleo Network Foundation is a non-profit organization that supports the development of the Aleo blockchain. It provides the core technology and zero-knowledge cryptographic infrastructure that underpins USAD's privacy features. The foundation focuses on creating tools for programmable and private digital transfers. The Aleo project has received venture capital backing from investors including a16z, Coinbase Ventures, and SoftBank. The foundation's Chief Operating Officer is Leena Im. ^[1]

Global Dollar Network (GDN)

In conjunction with the partnership, The Aleo Network Foundation joined the Global Dollar Network (GDN), an initiative founded by Paxos. The GDN is a network focused on the distribution of regulated digital dollars, including another Paxos-issued stablecoin, USDG. This integration places Aleo within a broader ecosystem for regulated stablecoin distribution. ^[4]

Use Cases

USAD is primarily designed for institutional and developer applications where data sensitivity and confidentiality are critical. Potential use cases include:

• Institutional Finance: Enabling businesses and financial institutions to conduct on-chain transactions, such as settlements and treasury management, without revealing their financial strategies to competitors.
• Payroll Systems: Offering a more efficient and stable method for processing payroll, particularly in economies with volatile local currencies. Benefits include instant salary payments, reduced processing costs by removing intermediaries, and providing employees with access to a stable, dollar-backed asset.
• Programmable Payments: Allowing developers to build applications that embed private and secure payments directly into their systems using smart contracts.

These applications leverage the stablecoin's ability to provide speed, cost reduction, and financial inclusion while protecting sensitive data. ^{[3] [4]}

Market Context and Competition

USAD was launched into a large and competitive stablecoin market. As of October 2025, the total market capitalization for stablecoins exceeded $297 billion, with cumulative transaction volume since 2019 surpassing $268 trillion. In 2024 alone, stablecoin transaction volume reached $27.6 trillion, exceeding the combined annual volumes of Visa and MasterCard by over 7%. The market leader at the time of USAD's launch was Tether (USDT), which held nearly 59% of the market share with a capitalization of $174.5 billion. ^{[2] [4]}

The launch of USAD was part of a trend of new stablecoins entering the market, including USDH by Native Markets on the Hyperliquid platform and USAT, a U.S.-focused stablecoin from Tether. USAD's primary differentiator in this crowded field is its focus on privacy through zero-knowledge cryptography, a feature not native to the dominant stablecoins. ^[2]

Regulatory Environment and Risks

The legal and regulatory landscape for stablecoins, particularly those with privacy features, is a critical factor in their adoption and long-term viability.

Regulatory Framework

In the United States, the GENIUS Act of 2025 created a regulatory framework for payment stablecoins. Key provisions of the act include classifying stablecoin issuers as financial institutions under the Bank Secrecy Act, mandating compliance with AML and CFT laws, and prohibiting issuers from paying interest to stablecoin holders. International bodies like the Bank for International Settlements (BIS) have advocated for technology-neutral regulation with a focus on KYC compliance, while the International Monetary Fund (IMF) has worked to promote global standards to mitigate systemic risks. ^[3]

Associated Risks

Privacy-focused stablecoins like USAD face a unique set of challenges and risks, particularly in the context of institutional finance:

• Regulatory and Compliance Risk: The confidential nature of transactions can complicate adherence to AML and CFT regulations, potentially attracting heightened scrutiny from regulators.
• Legal Uncertainty: The legal status of stablecoins continues to evolve globally, creating ambiguity around issues such as consumer protection and deposit insurance.
• Operational and Cybersecurity Risk: The complexity of privacy-enhancing technologies can make transaction monitoring more difficult, potentially increasing the risk of operational failures or fraud.
• Financial Stability and Systemic Risk: A major stablecoin de-pegging or failing could trigger widespread market effects, posing a systemic risk to the broader financial system.
• Trust and Market Acceptance: Institutions may be hesitant to adopt privately issued stablecoins with reduced transparency, preferring the established trust of traditional, regulated financial intermediaries for large-scale transactions.

These risks highlight the challenges that USAD and similar projects must navigate to achieve widespread adoption. ^[3]