Paxos confirms 100% backing of PayPal’s PYUSD stablecoin

As of August 31, the total value of assets on PayPal’s account “equals or exceeds the PYUSD token balance”. This is stated in a report by the issuer’s partner—the Paxos firm.

As of that date, PYUSD in circulation amounted to $44.4 million. On Paxos’ books in the interests of holders stablecoin issued by PayPal were assets valued at $44.5 million at face value.

97% of the reserves ($43 million) were allocated to overnight reverse-repo agreements on US government bonds. Counterparties to the deals are “authoritative financial institutions.” The remainder is in deposits in insured FDIC institutions.

In the event of a counterparty default, Paxos may liquidate collateral. Because all trades carry excess reserves, the risk of losses is not considered material, the report says.

The company warned that it may incur certain financial losses in the event of the partner bank’s insolvency, as insurance does not cover the entire amount of deposits.

On August 7, the company announced the launch of the US dollar-pegged PYUSD stablecoin based on Ethereum.

The asset has drawn a mixed reaction from members of the crypto community. Some said PYUSD would spur broad adoption of digital assets, while others pointed to centralization risks.

Bank of America experts noted that the launch of the “stablecoin” would improve payments efficiency and customer service, but the rollout of the asset is unlikely to be on a large scale.

According to analysts Nansen, more than 90% of PYUSD supply remains on the issuing Paxos balance sheet. Only 7% of the coin’s supply is on user wallets tied to Kraken, Gate.io and Crypto.com.

Back in the day, U.S. Representative Maxine Waters expressed “deep concern” about PayPal’s stablecoin launch, pointing to the absence of a regulatory framework for such assets.

Earlier JPMorgan analyst Nikolaos Panigirtzoglou said that PYUSD could benefit Ethereum by increasing the total value locked in the network.