Paxos will reveal the details of the reserves of the two stablecoins each month

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

Paxos opts for transparency on its reserves

The issuer of stablecoins Paxos will now unveil each month the content of its reserves. This measure will be applied for its USDP as well as Binance’s stablecoin, BUSD. It is a strong choice, in a context where stable assets are sometimes called into question on a background of uncertainty.

Like Circle and its USDC, the company was already publishing the audit reports of 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 novelty goes even further by revealing asset details making it possible to constitute this guarantee.

Charles Cascarilla, CEO and co-founder of Paxos, expresses his conviction regarding this decision:

“The only way to build trust in stablecoins and grow adoption of this important technology globally is to continue to embrace strong oversight and provide unprecedented transparency. Our stablecoins are cash-backed dollar and equivalents and these enhanced disclosures underscore that point. »

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USDP and BUSD backed by bonds

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

So, for each of the two stablecoins, Paxos will use bonds in two ways in its reserves. Some of these consist of US treasury bills with short maturities, that is, less than 90 days. The second part of these reservations is a little more complex.

It constitutes what is called a rest in the world of finance. Paxos issues loans to other regulated institutions for one day. In return, it asks for guarantees in US Treasury bonds. These guarantees have a value greater than the sum lent by Paxos. This collateral system works in such a way that even if the entity owing money does not repay its debt, Paxos would retain the obligations in order to be able to resell them for his own profit.

The company’s new monthly reports reveal the details of these assets. Thus, the BUSD reserve was constituted as such on June 30:

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

The reports give an accurate view of each position constituting these lines.

While FUD can easily appear in this period, as we have seen for the USDC, collateralized stablecoins have every interest in adopt such transparency policies. Indeed, unlike operations on the blockchain where everything is public and verifiable, we can only rely here on the declaration of a company. However, the fact that Paxos be regulated gives weight to the advanced figures.

👉 Also in the news – Stablecoin: Aave (AAVE) submits GHO idea to its governance

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Source: Paxos Reserves

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