I’ve spent a lot of time in the last three months talking, writing and educating about stablecoins. The main takeaway I’ve focused on is that stablecoins – as a financial product – are really nothing new.
Consider this: a check is a representation that the sender promised to transfer a dollar that is already in their bank account. After the check is written, the recipient’s bank verifies that the dollar is in fact in the account before releasing the funds. Now consider that a true stablecoin is a digital representation of a dollar that has already been verified to exist in the sender’s account. As a result there are no bounced checks or empty promises. Further, the check has a large number of hops, from customer to bank to central bank to bank to customer, where an issued stablecoin goes from sender directly to recipient without the other hops. In other words, the stablecoin is the digital, or internet equivalent, of handing someone a physical dollar.
Well-designed and truly stable stablecoins should be backed by cash and short-term US Treasuries with a maturity of less than 90 days. At Paxos, we are committed to offering the safest, most trustworthy stablecoins. Today, Paxos issues USDP and BUSD. These two stablecoins are the safest for the following reasons:
- They are both regulated by the NYDFS.
- They are fully backed 1:1 by cash and cash equivalents (US Treasuries with a maturity of less than 90 days and overnight loans secured only by US Treasuries).
- The reserves backing the tokens are held in fully segregated, bankruptcy remote accounts.
- The tokens are issued by an NYDFS regulated Trust company (Paxos Trust).
- Because the tokens are regulated by a primary prudential regulator, they are and always will be backed only by cash & cash equivalents
We’re excited that Paxos is now taking another step to increase the public’s trust in our stablecoins and lead the market in transparency. We have started to issue monthly reserve holdings reports that provide a full statement of instruments backing USDP and BUSD. We will outline the cash holdings by bank and dollar amount and US T-bills down to the CUSIP that back USDP and BUSD. By doing this, Paxos is proving that our tokens are only backed by cash and cash equivalents.