Paxos Reveals PayPal USD Stablecoin Fully Supported by Tangible Assets

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Mon, 02 Oct 2023, 05:25 PM
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Paxos Reveals PayPal USD Stablecoin Fully Supported by Tangible Assets

Paxos' report on PayPal USD stablecoin reveals major backing from U.S. Treasury, with minimal risks involved for investors.

Fri, 15 Sep 2023, 10:45 am UTC

The issuer of Ethereum-linked PayPal USD (PYUSD) stablecoin, Paxos, unveiled its inaugural transparency report. This documentation underscores that the said digital currency is solidly anchored by concrete assets.

The report showcases that as of August 31, 2023, PayPal USD assets resonate with, or even surpass, the value of the tokens in circulation. The token valuation stood at a prominent $44.4 million, with the overall estimated value of the backing assets slightly tipping over at $44.5 million.

Delving into the specifics of these assets, the U.S. Treasury reverse repurchase agreements significantly anchor PYUSD. These agreements, overseen by Paxos, primarily serve those invested in PYUSD. Data from the report highlighted that nearly $43 million, which is a substantial 97% of the assets underpinning PYUSD, rests within these U.S. Treasury agreements.

For context, a reverse repurchase agreement involves a formal deal wherein an entity consents to sell securities to another at a predetermined rate, with the promise of a forthcoming transaction. Paxos works with distinguished financial entities for these agreements, which mature within a day and have a hefty backing from U.S. Treasuries. It was also shared that if there’s a slip from a counterparty, Paxos possesses the means to cash in on the U.S. Treasury assets, covering any potential losses. The structure ensures the trades have ample backing, diminishing any substantial risk.

Further details revealed that Paxos, by the end of August, held fiat money amounting to $1,500,150 within insured banks. These holdings are commonly termed cash deposits. For interested parties, Paxos pointed towards the IntraFi network, listing down banks that are insured. A point of caution, however, was also raised, indicating that Paxos doesn’t indulge in private deposit insurance which isn't covered by established entities like the FDIC. Consequently, there's an inherent risk for the company if a bank were to collapse.

This transparency gesture by Paxos followed the introduction of PYUSD in collaboration with PayPal on August 7. By the month's conclusion, Paxos held a dominant 90% of this stablecoin. Meanwhile, 7% found its home across digital currency exchanges, naming Kraken, Gate.io, and Crypto.com. Adding to PYUSD’s traction, the prominent digital payment service BitPay incorporated it as a payment medium on September 12, joining other stablecoins like USD Coin (USDC).

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