PayPal’s PYUSD stablecoin has $44.5M in reserve, says Paxos report

Paxos, PayPal’s PYUSD issuer, released its first transparency report for the stablecoin. Documentation states that assets “meet or exceed the token balance.” Total tokens amount to $44.4 million, while the notional position value is $44.5 million as of August 31, 2023.

The U.S. Treasury supports PayPal’s PYUSD by holding a substantial amount of assets in reverse repurchase agreements, constituting 97% of its total assets, totaling $43 million. Paxos manages this treasury reverse repurchase agreement for the benefit of PYUSD holders.

A reverse repurchase agreement is a contractual arrangement between two parties wherein one party commits to buying securities from the other party at a predetermined price. Moreover, the buyer saves to repurchase the securities later for another (usually higher) specified worth. 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 can liquidate the U.S. Treasury collateral to make itself whole. As all trades overcollateralized, the risk of loss is not deemed material.”

As of August 31, Paxos held $1.5 million in cash deposits at insured depository institutions. Additionally, the firm has provided a link to the IntraFi network, which lists 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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