Paxos, a blockchain infrastructure platform, has recently released a breakdown of its stablecoin reserves and a comparison of reserves with other stablecoins such as USDC and Tether. The purpose of this study was to emphasize the reliability of the coin.
The breakdown revealed the reserves of BUSD (Binance USD) and PAX (Paxos Standard). 96% of the reserve assets were retained as cash or cash equivalents while the remaining 4% were invested in the US treasury bills.
Paxos disclosed its asset reserves a day after Circle revealed its stablecoin reserves. According to the Circle’s report, only about 61% of its currency (USDC) is backed by cash and cash equivalents. The largest USD-backed stablecoin USDT (USD Tether) has just over 75% of its reserves as cash, cash equivalents, short-term deposits, and commercial paper. 49% of its reserves are under unspecified commercial paper, the ratings of which were not disclosed by the company.
Approval and supervision
Apart from Paxos’s PAX and Binance USD, the report also listed cryptocurrencies exchange Gemini’s GUSD, also USD backed stablecoin. All three of these stablecoins are approved and supervised by the New York financial authorities. The approval is important because it ensures that:
- The number of US Dollars in reserves are equal or greater than the stablecoins since the value of stablecoins is equivalent to the USD.
- Reserves are to be held in US treasury bills or any other safe form.
- Reserves are to be kept separate from the platforms’ other assets.
Paxos Standard follows the ERC-20 protocol.
Currently, the stablecoins are not regulated by the national federal regulatory system in the US. Instead, each state has the authority to regulate and manage the stablecoins. USDT was banned by the New York State Department of Financial Services (NYDFS) after the company failed to show enough reserves to back up its stablecoin.
