Paxos Transparency Report Confirms 100% Backing of PayPal PYUSD Stablecoin

Paxos, the stablecoin issuer, has taken a significant step towards transparency by releasing its inaugural report on the Ethereum-based stablecoin, PayPal USD (PYUSD). In this comprehensive disclosure, Paxos affirms that PYUSD is fully backed by tangible assets, instilling confidence in its users and the broader crypto community.

According to the report, the cumulative assets securely held in PayPal USD custody not only “meet or exceed the token balance” but also precisely match it. As of August 31, 2023, the total outstanding PYUSD tokens amounted to $44.4 million, aligning closely with the total notional position value of $44.5 million.

The lion’s share of PYUSD assets finds solid backing in U.S. Treasury reverse repurchase agreements, meticulously safeguarded in custody by Paxos for the benefit of PYUSD holders. Notably, approximately $43 million, which translates to nearly 97% of the total assets in PYUSD custody, is confidently held in these Treasury reverse repurchase agreements.

It’s worth understanding that a reverse repurchase agreement is a contractual arrangement between two parties. In this case, one party commits to selling securities to another party at a predetermined price within a set timeframe.

Paxos assures the community that these repurchase agreements are characterized by overnight maturity, involve reputable financial institutions, and are overcollateralized with U.S. Treasuries. This overcollateralization ensures that even in the unlikely event of a counterparty default, Paxos can promptly liquidate the U.S. Treasury collateral to cover any potential losses, making the risk of loss negligible.

Furthermore, as of August 31, Paxos held approximately $1,500,146 in fiat currency at insured depository institutions, commonly referred to as cash deposits. They also provided a link to the IntraFi network, offering a comprehensive list of insured depository institutions where funds may be securely placed.

Paxos made it clear that they currently do not hold any active private uninsured deposit insurance policies. They also reminded users that not all deposits enjoy FDIC or private insurance coverage, implying that in the unlikely event of a bank insolvency, Paxos might still be exposed to losses.

This transparency report follows closely on the heels of Paxos and PayPal’s successful launch of PYUSD on August 7. By late August, an impressive 90% of PYUSD was held in Paxos wallets, with approximately 7% distributed across prominent exchanges like Kraken, Gate.io, and Crypto.com.

In another significant development, on September 12, BitPay, a major cryptocurrency payment firm, welcomed PYUSD as a payment option on its platform. This addition complements the existing support for USD-pegged stablecoins such as USD Coin (USDC), further expanding PYUSD’s utility in the digital payment ecosystem.

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