A Transparent Look at Paxos’ Backing of PayPal USD Stablecoin

A Transparent Look at Paxos’ Backing of PayPal USD Stablecoin

Stablecoin issuer Paxos has recently released the first transparency report for PayPal USD (PYUSD), an Ethereum-based stablecoin. The report has provided insights into the backing of the coin, reassuring users that it is fully backed by assets. As of August 31, 2023, the total tokens outstanding amount to $44.4 million, while the total assets held in PayPal USD custody meet or exceed this balance, with a total notional position value of $44.5 million.

Backing by U.S. Treasury Reverse Repurchase Agreements

The majority of the assets backing PYUSD come from U.S. Treasury reverse repurchase agreements held in custody by Paxos. These agreements represent approximately $43 million, which accounts for nearly 97% of the total assets in custody for PYUSD. The use of reputable financial institutions and overcollateralization with U.S. Treasuries in these agreements ensures the safety of the backing. In the event of a default by the counterparty, Paxos has the ability to liquidate the U.S. Treasury collateral to cover any losses. Furthermore, the overcollateralized nature of the trades significantly reduces the risk of loss, making it negligible.

In addition to the U.S. Treasury reverse repurchase agreements, Paxos also holds $1,500,146 of fiat currency as cash deposits in insured depository institutions. The firm provides a link to the IntraFi network, which lists all of the insured depository institutions where funds may be placed. It’s important to note that Paxos currently does not maintain any active private uninsured deposit insurance policies. While not all deposits are covered by the FDIC or private insurance, Paxos remains aware that potential losses may still occur in the event of a bank insolvency.

Adoption and Distribution of PYUSD

The release of the transparency report comes several weeks after the launch of PYUSD by Paxos and PayPal on August 7. By the end of August, approximately 90% of PayPal USD was held in wallets managed by Paxos, with the remaining 7% distributed among exchanges such as Kraken, Gate.io, and Crypto.com. The adoption of PYUSD has continued to expand, with the major cryptocurrency payment firm BitPay recently adding it as a payment option on its platform, joining other USD-pegged stablecoins like USD Coin (USDC).

The publication of this transparency report by Paxos demonstrates the company’s commitment to providing users with a clear understanding of the backing behind PYUSD. By fully backing the stablecoin with assets, particularly U.S. Treasury reverse repurchase agreements, Paxos offers users reassurance that their investments in PYUSD are secure. With the growing adoption of PYUSD by major platforms, the stablecoin is positioned to become a trusted and widely accepted digital currency in the cryptocurrency ecosystem.

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