Home » BUSD and USDP: Paxos to release monthly reserve details for both stablecoins

BUSD and USDP: Paxos to release monthly reserve details for both stablecoins

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The company Paxos, which issues the USDP and the BUSD, has chosen to publish each month the details of the liquidity reserves of the two stablecoins. This is a strong move in terms of transparency, and reinforces the monthly audit reports already published.

Paxos chooses to be transparent about its reserves

Stablecoin issuer Paxos will now disclose the contents of its reserves on a monthly basis. This measure will be applied to its USDP as well as Binance’s stablecoin, the BUSD. This is a strong choice, in a context where stablecoins are sometimes questioned against a backdrop of uncertainty.

Like Circle and its USDC, the company was already publishing audit reports on its reserves every month. These reports, certified by the firm Withum, attest to the amount held in reserve to collateralise the stablecoins issued. But this new release goes even further by revealing the details of the assets that make up this collateral.

Charles Cascarilla, CEO and co-founder of Paxos, expresses his belief in the decision
The only way to build confidence in stablecoins and expand the adoption of this important technology globally is to continue to adopt robust oversight and provide unprecedented transparency. Our stablecoins are a dollar backed by cash and equivalents and these enhanced disclosures underscore that point. “

USDP and BUSD backed by bonds

The company explains that Paxos Trust, which is the entity issuing the BUSD and USDP is regulated by the New York State Department of Financial Services (NYDFS). As such, these stablecoins can only be backed by “cash and cash equivalents”. In other words, fiat money or bonds.

Thus, for each of the two stablecoins, Paxos will use bonds in two ways in its reserves. One part of the reserves is made up of US Treasury bills with short maturities, i.e. less than 90 days. The second part of the reserves is a bit more complex.

It is what is called a repo in the financial world. Paxos issues loans to other regulated institutions for one day. In return, it asks for collateral in US Treasury bills. This collateral is worth more than the amount lent by Paxos. This collateral system works in such a way that even if the entity owing the money were to default on its debt, Paxos would retain the bonds so that it could resell them for its own benefit.

The company’s new monthly reports provide details of these holdings. For example, the BUSD reserve was set up as follows on 30 June:

  • About $10.5 billion in short-term bonds;
  • About USD 6 billion in bonds for repo operations;
  • Just over $738 million in cash.

The reports give a precise view of each position making up these lines.

While FUD can easily appear at this time, as we have seen with the USDC, collateralised stablecoins benefit from such transparency policies. Indeed, unlike blockchain transactions where everything is public and verifiable, here we can only rely on a company’s declaration. However, the fact that Paxos is regulated lends weight to the figures given.

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