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Stablecoin issuer Paxos has published its first transparency report for PayPal USD (PYUSD), an Ethereum-based stablecoin, and stated that PayPal USD is fully backed by assets. The report confirms that PYUSD is fully backed by assets and that the total asset amount exceeds the token balance. The largest support comes from US Treasury reverse repo agreements. Paxos provides information about the lack of deposit insurance and potential loss risk. This report provides an important source of information about the reliability of PYUSD, which was launched on August 7th.
PYUSD Renews Trust
According to the report, the total assets held in PayPal USD match or exceed the token balance, and as of August 31, 2023, the total outstanding token amount is $44.4 million. The total nominal position value is stated as $44.5 million. The largest share of PYUSD assets is supported by US Treasury reverse repo agreements held by Paxos for the benefit of PYUSD holders. According to the data, $43 million or approximately 97% of the total assets of PYUSD are held in Treasury reverse repo agreements.
A reverse repo agreement is an arrangement based on a contract between two parties, in which one party commits to selling securities to the other party at a specified price. Paxos stated the following in its statement:
“Our repo agreements are overnight with reputable financial institutions and are collateralized with US Treasury bonds. In the event of default by the counterparty, Paxos can recover itself by converting the US Treasury collateral into cash. Since all transactions are over-collateralized, the risk of loss is not considered significant.”
90% of Reserves Held in Paxos Wallets
As of August 31, Paxos also holds $1,500,146 worth of cash in insured depositary institutions, referred to as cash deposits. Paxos provided a link to the full list of insured depositary institutions that can be used for depositing funds into the IntraFi network.
“Paxos currently does not have any active private uninsured deposit insurance policies. All deposits are not FDIC-insured or covered by private insurance, and Paxos may still incur losses in the event of a bank’s insolvency.”
The report comes weeks after Paxos and PayPal launched PYUSD on August 7th. As of the end of August, 90% of PayPal USD is held in Paxos wallets, with approximately 7% distributed among exchanges such as Kraken, Gate.io, and Crypto.com. On September 12th, major cryptocurrency payment firm BitPay adopted PYUSD as a payment option on its platform, in addition to already supported stablecoins like USD Coin (USDC).
