- Paxos has presented an openness report showing PayPal USD stablecoin’s solid financial backing.
- Data indicates PayPal USD stablecoin assets equal or slightly exceed circulating tokens as of August 31, 2023.
- A vast majority of these assets, around 97%, are in U.S. Treasury reverse repurchase agreements overseen by Paxos.
Shedding light on its financial operations, Paxos, the company behind PayPal’s digital currency, has shared its first transparency report. This document strongly indicates that the PayPal USD (PYUSD) stablecoin is confidently anchored with real-world assets.
According to the report, as of August 31, 2023, the assets that back PayPal USD match the total value of circulating tokens. The numbers don’t lie: while the circulating tokens are valued at $44.4 million, the assets securing them slightly edge out at $44.5 million.
Taking a closer look, it’s evident that U.S. Treasury reverse repurchase agreements play a major role in providing security for PYUSD. Paxos supervises these agreements, which are crucial for those who have put their money into PYUSD. Nearly $43 million of the assets backing this digital currency, a significant 97%, are tied to these U.S. Treasury agreements.
But what exactly is a reverse repurchase agreement? Simply put, it’s an arrangement where one party agrees to sell securities to another at a specific price, with a mutual understanding of a future transaction. Paxos collaborates with notable financial institutions for these deals. Typically, they mature within a day and are heavily secured by U.S. Treasuries. Paxos also has a fail-safe: if a deal goes south, they can utilize the U.S. Treasury assets to offset any losses. This structure fortifies the trades with a strong safety net.
In addition to these securities, Paxos held a cash sum of $1,500,150 in insured banks by August’s end. These funds, often referred to as cash deposits, sit in banks listed on the IntraFi network. Yet, Paxos sounded an alarm, noting that they don’t use private deposit insurance that’s not protected by reliable entities like the FDIC. This means if a bank goes under, Paxos is in a vulnerable position.
This move towards openness from Paxos comes after they rolled out PYUSD with PayPal on August 7. By the end of August, a staggering 90% of this digital currency was controlled by Paxos. On the flip side, digital currency exchanges, including Kraken, Gate.io, and Crypto.com, accounted for 7% of PYUSD. Boosting the currency’s popularity, BitPay, a leading digital payment provider, accepted PYUSD as a payment option on September 12, placing it alongside other recognized stablecoins like the USD Coin (USDC).
PayPal Debuts Stablecoin for Seamless Transactions
In a bid to further cement its position in the evolving financial ecosystem, PayPal has introduced its own stablecoin, PYUSD. This digital currency is developed with a focus on streamlining payments and transfers. Unlike the often volatile nature of many cryptocurrencies, stablecoins, like PYUSD, maintain a more consistent value. This stability is typically achieved by pegging them to established currencies, in this case, the US Dollar.
PayPal’s move aligns with its overarching objective to be deeply integrated within the cryptocurrency space. By offering PYUSD, the digital payment platform aims to provide its vast user base with smoother, crypto-centric transaction alternatives. This innovation underscores PayPal’s commitment to staying ahead of the curve and ensuring its platform remains versatile for a diverse range of financial activities.