Today blockchain firm Paxos issued far more detailed disclosures about the assets that back both the Pax dollar (USDP) stablecoin and Binance USD (BUSD), the third-largest stablecoin for which Paxos is the issuer.
It breaks down the assets by specific Treasury securities in which it has invested and shows the average maturity.
“The only way we can build trust in stablecoins and grow the adoption of this important technology globally is by continuing to embrace robust oversight and providing unprecedented transparency,” said Charles Cascarilla, Paxos CEO and Co-Founder. “These enhanced disclosures underscore this point.”
Shortly after the collapse of the Terra algorithmic stablecoin last month, the New York State Department of Financial Services (NYDFS), which regulates Paxos Trust issued guidelines for stablecoin issuers. This includes requiring the backing assets to be invested only in bank accounts and short-term Treasuries. Paxos has always been more conservative than other stablecoin issuers, investing in cash and Treasuries.
Last year, after many questions about the nature of the commercial paper that backs the Tether stablecoin, Circle announced that its USDC stablecoin’s assets would no longer include commercial paper. And even Tether has gradually reduced the proportion from half of the assets to a quarter and plans to reduce them further.
Another NYDFS requirement is more timely attestations, requesting publication within 30 days. Again, in contrast to some competitors, Paxos has been ahead of the curve, publishing attestations shortly after month-end.
In contrast, the largest stablecoin, Tether only reports quarterly, usually six weeks after quarter-end. Its latest published report is for the end of March, and its next one likely won’t be released before mid-August, despite the crypto crash in between.
Even though Paxos doesn’t need to change anything to comply with NYDFS requirements, with this detailed disclosures disclosed today, it’s taken it a step further.
Some might argue transparency is always good. And for the most part we’d agree. One thing that Paxos includes in its collateral transparency report is the list of banks that hold deposits. If there were a run on one of those institutions, that might unnecessarily create concerns for Paxos stablecoins, even if the exposure was negligible. Paxos doesn’t keep a massive proportion of backing assets in bank accounts, it spreads them between several institutions, and it has private insurance for a substantial proportion.