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Stablecoin provider Paxos has released its inaugural transparency report for the Ethereum-based stablecoin PayPal USD (PYUSD), confirming that the coin is entirely backed by assets.
The report indicates that the total assets in PayPal USD custody “meet or exceed the token balance,” with the total outstanding tokens reaching $44.4 million as of Aug. 31, 2023. The overall notional position value was $44.5 million.
The largest portion of PYUSD assets is secured by U.S. Treasury reverse repurchase agreements held in custody by Paxos for the advantage of PYUSD holders. The data reveals that approximately $43 million — or nearly 97% of total assets in PYUSD custody — are maintained in Treasury reverse repurchase agreements.
Data from Paxos’ PYUSD transparency report. Source: Paxos
A reverse repurchase agreement is a contractual arrangement between two entities, where one party agrees to sell securities to another at a predetermined price with a commitment.
“Our repurchase agreements have overnight maturity with reputable financial institutions and are overcollateralized with U.S. Treasuries,” Paxos stated, adding:
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“In the event of a default by the counterparty, Paxos can liquidate the U.S. Treasury collateral to recover its position. Since all trades are overcollateralized, the risk of loss is not considered material.”
As of Aug. 31, Paxos also maintained $1,500,146 in fiat currency at insured depository institutions, referred to as cash deposits. Paxos provided a link to the IntraFi network, which includes a complete list of insured depository institutions where funds may be held.
“Paxos currently does not possess any active private uninsured deposit insurance policies. Not all deposits are protected by the FDIC or private insurance, and Paxos may still face losses in the event of a bank insolvency,” the company added.
Related: PayPal’s new PYUSD stablecoin faces legal challenges and ‘less functionality’
The report follows weeks after Paxos and PayPal launched PYUSD on Aug. 7. By late August, 90% of PayPal USD was reportedly stored in Paxos wallets, while around 7% was distributed across exchanges such as Kraken, Gate.io, and Crypto.com.
On Sept. 12, the prominent cryptocurrency payment provider BitPay incorporated PYUSD as a payment option on its platform, alongside already supported USD-pegged stablecoins like USD Coin (USDC).
