Paxos, the centralized issuer of Paxos Standard stablecoin, reveals the basket of assets backing the regulated cryptocurrency. In a blog post on Wednesday by Dan Burstein, the CCO of Paxos has unveiled the stablecoin is backed by 96 percent cash and equivalents. The remaining 4 percent contributes to US Treasury Bills.
Paxos, a centralized issuer of Paxos Standard (PAX) and Binance USD (BUSD) stable coins, has released its audit on collateralized assets backing the stablecoin cryptocurrencies. Dan Burstein, the CCO at Paxos, presented a report that states 96 percent of the stablecoin’s (PAX, BUSD) backing consists of U.S. Dollars and cash equivalents. The remaining 4 percent comprises U.S. Treasury bills, which the report states to have audited separately from cash equivalents as the Treasury Bills are set to mature in four months.
Paxos has yearned for regulatory scrutiny and is dedicated to transparency for providing centralized cryptocurrency assets. Paxos became the first Trust Fund manager to handle and distribute crypto assets approved by the New York State Department of Financial Services under the New York Banking Law in 2015. Paxos Standard, which is a fully USD Collateralized stable coin that is built upon the Etherium blockchain. The basic fundamental of the regulated stablecoin is “1 USD=1 PAX”, and when each PAX is redeemed for USD, the PAX is removed (burnt) from the circulation.
Burstein, in his blog post, draws a line between regulated and unregulated stable coins stating:
“The principal value of regulatory oversight is to ensure that the reserves consist of real, liquid, accessible dollars – if neither USDC nor Tether can fulfill these promises, can they even be considered dollar-backed stable coins”?
The criticism for USDC (issued by Circle) and USDT (Tether) stable coins come from the audits for asset baskets collateralizing respective stable coins. In recent audits released by Circle and Tether, their stable coins are backed by 61 percent cash and cash equivalents and a mere 2.9 percent of cash reserves as Tether reserves.
Burnstein also criticized the two largest stablecoins as “corporate debt obligations” and “the issuer can (and often does) use consumer funds to pursue risky high yield investments for its own financial gain” amongst other regulatory, and risks for investors.
Paxos has to maintain backing assets held in safe and liquid forms, like the U.S.-based insured bank accounts and Treasury bonds, as the stablecoin is regulated and under scrutiny by the New York State Department of Financial Services.