Paxos, the stablecoin issuer, has taken a significant step in enhancing transparency within the cryptocurrency industry by releasing the inaugural transparency report for its Ethereum-based stablecoin, PayPal USD (PYUSD). This report affirms that PYUSD is fully collateralized with assets, underlining its commitment to maintaining the stability and integrity of this digital currency.
The transparency report, which covers data up to August 31, 2023, provides a comprehensive overview of the assets backing PYUSD and their relationship to the total tokens in circulation. According to the report, the total assets securely held in PayPal USD custody not only match but exceed the token balance, a testament to the coin’s robust collateralization. As of the specified date, the total outstanding PYUSD tokens amounted to $44.4 million, closely aligned with a total notional position value of $44.5 million.
One of the most noteworthy aspects of the report is the composition of assets supporting PYUSD. The majority of these assets are backed by U.S. Treasury reverse repurchase agreements, with a staggering $43 million, equivalent to nearly 97% of the total assets in PYUSD custody, held in these agreements.
A reverse repurchase agreement is a contractual arrangement where one party agrees to sell securities to another party at a specified price. In this case, Paxos holds these agreements for the benefit of PYUSD holders. Importantly, Paxos reassured that these repurchase agreements have overnight maturities, involve reputable financial institutions, and are overcollateralized with U.S. Treasuries. This over-collateralization ensures that the risk of loss is considered minimal, as Paxos can liquidate the U.S. Treasury collateral to recover any potential shortfalls in the event of a counterparty default.
In addition to these Treasury-backed assets, Paxos disclosed that it held $1,500,146 in fiat currency within insured depository institutions as cash deposits. The report also included a link to the IntraFi network, offering a comprehensive list of these insured depository institutions where funds may be placed.
Paxos made it clear that they currently do not have any active private uninsured deposit insurance policies and highlighted that not all deposits are covered by the FDIC or private insurance. Consequently, Paxos acknowledged the possibility of incurring losses in the event of a bank insolvency.
Paxos and PayPal’s joint launch of PYUSD
This transparency report comes on the heels of Paxos and PayPal’s joint launch of PYUSD on August 7, representing a milestone in the cryptocurrency industry. By the end of August, it was reported that approximately 90% of PayPal USD was held in Paxos wallets, demonstrating a strong vote of confidence in the stablecoin. The remaining 7% was distributed across various cryptocurrency exchanges, including Kraken, Gate.io, and Crypto.com.
Furthermore, Paxos has gained another notable achievement as BitPay, a major cryptocurrency payment company, adopted PYUSD as a payment option on its platform on September 12. This addition to the BitPay ecosystem expands the utility and accessibility of PYUSD, providing users with more options for transacting in this stablecoin, alongside other USD-pegged stablecoins like USD Coin (USDC).
