Paxos, the blockchain company responsible for issuing PayPal’s stablecoin, PYUSD, released on Monday (18) the first report regarding the reserves of the stable digital currency.
According to the document, a total of US$45.3 million in assets backed PYUSD at the end of last month. Data from CoinGecko this Tuesday (19) indicates that PayPal’s stablecoin has a total market value of US$44.3 million. In other words, according to the report, the stable cryptocurrency would be fully guaranteed.
PYUSD is guaranteed just over $1.5 million in cash deposits. However, the majority of reserves of the US dollar-pegged digital stablecoin are in repurchase agreements backed by US Treasury bonds: $43.8 million.
PayPal stablecoin reserves
Reverse repurchase agreements are actually a contractual agreement between two parties. In this case, one party agrees to sell securities to another party at a specified price with a commitment to repurchase the securities at a later date at another specified (usually higher) price.
As Paxos reported, in the event of a counterparty’s default, the company is able to liquidate the US Treasury guarantee to recover. This is because their agreements involve negotiations with “reputable financial institutions” with overnight maturity, which ultimately reduces the risk of loss.
“As all trades are over-collateralized, the risk of loss is not considered material,” the company said in the report.
In its initial announcement of PYUSD, PayPal emphasized that reserve reporting would be a pillar of the product’s monthly frequency.
What the report makes clear, however, is that PayPal’s stablecoin still has a long way to go in its quest to make cryptocurrency a tool for global payments. This is because the stable cryptocurrency is still very far away, in terms of market value and adoption, from sector giants such as USDT and USDC.
The largest stablecoin on the market has a “market cap” of more than US$83 billion. Meanwhile, USDC has a market cap of $26 billion. As a result, PYUSD ranks only 20th in CoinGecko’s stablecoins ranking. Over the last day, PYUSD recorded around $1.2 million in trading volume, according to CoinGecko.