Stablecoin issuer Paxos has released its inaugural transparency report for the Ethereum-based PayPal USD (PYUSD) stablecoin, affirming that the coin is fully backed by assets. According to the report, the total assets held in PayPal USD custody either match or exceed the token balance, with the total tokens outstanding reaching $44.4 million as of August 31, 2023. The total notional position value stood at $44.5 million.
The majority of PYUSD assets are supported by U.S. Treasury reverse repurchase agreements held in custody by Paxos for the benefit of PYUSD holders. This data reveals that approximately $43 million, or nearly 97% of the total assets in PYUSD custody, are tied up in Treasury reverse repurchase agreements. A reverse repurchase agreement is a contractual arrangement between two parties, where one party commits to selling securities to another party at a predetermined price.
Source: Paxos
Paxos emphasized that their repurchase agreements are overnight maturity agreements with reputable financial institutions and are overcollateralized with U.S. Treasuries. In case of a counterparty default, Paxos can liquidate the U.S. Treasury collateral to cover any losses. Given the overcollateralization, the risk of loss is considered minimal.
As of August 31, Paxos also held $1,500,146 of fiat currency in insured depository institutions, commonly referred to as cash deposits. Paxos provided a link to the IntraFi network, which lists insured depository institutions where funds may be placed.
Paxos clarified that they currently do not have any active private uninsured deposit insurance policies. Notably, not all deposits are covered by the FDIC or private insurance, and Paxos acknowledges that they may still face losses in the event of a bank insolvency.
This transparency report follows the launch of PYUSD by Paxos and PayPal on August 7. By late August, approximately 90% of PayPal USD was held in Paxos wallets, with the remaining 7% distributed among exchanges like Kraken, Gate.io, and Crypto.com.
On September 12, leading cryptocurrency payment firm BitPay integrated PYUSD as a payment option on its platform, alongside already supported USD-pegged stablecoins like USD Coin (USDC). This move further strengthens the utility and adoption of PYUSD in the crypto payment ecosystem.
