Paxos Reveals USDP and BUSD Reserves Challenge Other Stablecoins

Paxos Trust has become the first stablecoin issuer to reveal the composition of its reserves for Binance USD (BUSD) and Pax Dollar (USDP).

Disclosure, down to the unique treasury bill identification number, while refreshing for the industry, should not dampen calls for stablecoin regulation.

The collapse of the TerraUSD stablecoin in May refocused attention on the $153 billion stablecoin industry. TerraUSD was not backed by reserves but maintained its peg through an arbitration mechanism tied to its sister token Luna, which ultimately failed.

The collapse of TerraUSD wiped billions from the broader cryptocurrency market, and regulators fear that stablecoins without sufficient reserves are prone to bank runs.

Federal Reserve Vice Chairman Lael Brainard spoke in a speech about the importance of stablecoins being exchangeable for fiat currency on demand and pointed to the mass Tether release in May as proof that stablecoins must comply with prudential regulations to avoid racing.

Until now, regulators have been engaged in an uphill battle with stablecoin issuers, who have been reluctant to disclose the composition of their reserves.

Paxos Trust, the backer of Pax Dollar and Binance USD, is looking to change that. CEO Charles Cascarilla, in a statement, argued for greater transparency as a path to widespread adoption and trust in the asset class. He claimed that the Pax Dollar had been the safest stablecoin backed by the US dollar.

Composition of Paxos reserves for USDP and BUSD

Dollar issuer Pax disclosed in a report the unique identification of each Treasury bill and bond held in its reserve, as well as the institutions holding its reserves. The report also revealed the reserve composition for Pax Dollar, with a market cap of $861 million, and Binance USD, with a market cap of $18 billion. The composition of USDP’s reserves is approximately $300 million each in treasury bills and treasury bills and approximately $200 million in cash deposits.

Binance’s USD reserves consist of $10 billion in treasury bills, $6 billion in treasury bonds, and around $730 million in cash deposits.

Where are the other stablecoin issuers

Tether, the company behind the eponymous stablecoin, has always been wary of backing its currency and got in trouble with US regulators for misrepresenting the composition of its reserves.

Be[In]Crypto announced nearly three weeks ago that Tether would be audited by one of the top 12 accounting firms based in the Cayman Islands, called MHA. Previously, MHA provided attestations or snapshots of company financial statements as of specific dates.

Tether CTO Paolo Ardoino said at the time that auditing by one of the 12 largest firms was sufficient, adding that the big four firms KPMG, PWC, EY and Deloitte were hesitant to provide full-scale audits in a fluid regulatory environment.

Circle Internet Financial, which issues one of the top three USDC stablecoins, said Barrons that the company is committed to greater transparency.


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