Stablecoin issuer Paxos has released its inaugural transparency report on the Ethereum-based stablecoin PayPal USD (PYUSD), confirming the token's full asset backing.
According to the report, the total assets held in PayPal USD custody have either met or exceeded token balances, with outstanding tokens totaling $44.4 million as of August 31, 2023. Notional positions matched this figure at $44.5 million.
The majority of PYUSD assets are backed by the US Treasury Reverse Repurchase Agreement, which Paxos manages for the benefit of PYUSD holders. An impressive $43 million of PYUSD assets are held in Treasury reverse repurchase agreements, constituting nearly 97% of the total assets in PYUSD custody. These reverse repurchase agreements are typically short-term contracts between two parties, where one agrees to sell securities to the other at a predetermined price.
Paxos emphasized the security of these repurchase agreements, describing them as overnight maturities with reputable financial institutions and highlighted that they are over collateralized with US Treasury securities. This means that in case of a counterparty default, Paxos can liquidate the US Treasury collateral to protect the token's integrity. Due to the over collateralization, the risk of loss is considered minimal.
As of August 31, Paxos also held $1,500,146 in fiat currency as cash deposits at insured depository institutions. Paxos provides links to the IntraFi network or a comprehensive list of insured depository institutions where funds can be deposited. However, the report emphasized that Paxos does not currently hold any active private uninsured deposit insurance policies. It also cautioned that not all deposits are covered by the FDIC or private insurance, and Paxos might still incur losses if a bank were to fail.
This transparency report was released shortly after Paxos and PayPal introduced PYUSD on August 7. By the end of August, 90% of PayPal dollars were reportedly held in Paxos wallets, with approximately 7% spread across various exchanges, including Kraken, Gate.io, and Crypto.com. Furthermore, on September 12, BitPay, a prominent cryptocurrency payments firm, adopted PYUSD as a payment option on its platform, alongside support for other US dollar-pegged stablecoins like USD Coin.
