PayPal's PYUSD Stablecoin is 100% Backed
Paxos releases inaugural transparency report confirming full collateralization of PYUSD, ensuring stability and integrity of the Ethereum-based stablecoin.
Paxos, the issuer of the Ethereum-based stablecoin PayPal USD (PYUSD), recently released its inaugural transparency report. The report confirms that PYUSD is fully collateralized with assets, emphasizing the commitment to maintaining the stability and integrity of this digital currency.
The transparency report provides a detailed overview of the assets backing PYUSD and their relationship to the total tokens in circulation. As of August 31, 2023, the assets securely held in PayPal USD custody not only match but exceed the token balance. This strong collateralization is evident with the total outstanding PYUSD tokens amounting to $44.4 million, closely aligned with a total notional position value of $44.5 million.
The majority of these assets are backed by U.S. Treasury reverse repurchase agreements. These are contractual arrangements where one party agrees to sell securities to another at a specified price. Paxos holds these agreements for the benefit of PYUSD holders. These agreements have overnight maturities with reputable financial institutions and are overcollateralized with U.S. Treasuries. This structure ensures minimal risk of loss, 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 also disclosed holding $1,500,146 in fiat currency within insured depository institutions as cash deposits. However, it's essential to note that not all deposits are covered by the FDIC or private insurance, indicating potential risks in the event of a bank insolvency.
Paxos and PayPal jointly launched PYUSD on August 7, marking a significant milestone in the cryptocurrency industry. By the end of August, approximately 90% of PayPal USD was held in Paxos wallets, showcasing immense trust in the stablecoin. The remaining 7% was distributed across various cryptocurrency exchanges, including Kraken, Gate.io, and Crypto.com.
Furthermore, on September 12, BitPay, a leading cryptocurrency payment company, adopted PYUSD as a payment option on its platform. This move further improves the utility and accessibility of PYUSD, offering users more transaction options alongside other USD-pegged stablecoins like USD Coin (USDC).