PayPal’s PYUSD issuer, Paxos, has released its first transparency report for the stablecoin. As per the document, assets “meet or exceed the token balance.” Total tokens amount to $44.4 million, while the notional position value sits at $44.5 million as of Aug. 31, 2023. A majority of PayPal’s PYUSD assets are backed by U.S. Treasury reverse repurchase agreements. Treasury reverse repurchase agreements make up 97% of the total assets, amounting to $43 million. Paxos holds these treasury reverse repurchase agreements for the benefit of PYUSD holders.
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A reverse repurchase agreement is a type of agreement between two parties where one party agrees to sell securities to the other party at a specific price. Moreover, the buyer has a commitment to buy the securities back at a later date for another (usually higher) specified price. According to PayPal’s PYUSD issuer Paxos,
“Our repurchase agreements are overnight maturity with reputable financial institutions and overcollateralized with the U.S. Treasuries. In the event of a default by the counterparty, Paxos is able to liquidate the U.S. Treasury collateral to make itself whole. As all trades are overcollateralized, the risk of loss is not deemed to be material.”
Other assets backing PayPal’s PYUSD
Paxos also held $1.5 million in cash deposits as of Aug. 31, held at insured depository institutions. Additionally, the firm has provided a link to the IntraFi network, which has a list of the depository institutions. However, there are still risks to the assets held by the firm. The report stated that “Paxos currently does not have any active private uninsured deposit insurance policies.”
Additionally, it noted that not all deposits are covered by the FDIC or private insurance. Therefore, Paxos could “still incur losses in the event of a bank insolvency.”
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