The blockchain infrastructure platform announces that their Paxos stablecoin will rebrand from PAX to USDP at the end of August 2021. The announcement of the change of name for the Paxos stablecoin builds on the protocol’s desire to create a distinct brand identity from other stablecoin operators, including Tether, Circle and USDC.
In July, Paxos released a blog post which called out the “unregulated” USDT and USDC stablecoins, and took a dig at the reserve breakdowns of both of the companies, with General Counsel and Chief Compliance Officer Dan Burnstein swiping at both digital assets, saying they were “backed by illiquid and risky debt obligations – a critical weakness that no prudential regulator would allow to exist as this creates undue risk for their customers.”
“The USDP ticker more easily identifies Pax Dollar as a US dollar-backed token…this change makes it easier for both newcomers and the crypto literate to grasp our dollar backing. The updated USDP smart contract will go live on August 31, 2021.”Walter Hessert, Head of Strategy at Paxos
Paxos Stablecoin’s rebrand to highlight 100% reserves
Paxos previously noted that there were only three regulated, Dollar backed stablecoins in the world, being Gemini, Binance and of course the Paxos stablecoin.
According to Walter Hessert, the head of Strategy, the Paxos stablecoin has maintained 100% cash or cash equivalent reserves, and goes on to explain that this relates to short-term treasury bills. Whilst acknowledging that competitor Gemini operates the GUSD under an almost identical regulatory system, it goes on to note that Gemini does not publish data relating to its’ liquidity reserves.
“As the market shifts from crypto and DeFi use cases into more global use cases for payments for goods and services types of use cases stablecoins have a really important role to play there and frankly, there’s just a lot of demand for a regulated, trustworthy, transparent, stablecoin despite there being other options in the market. It became the right time for us to make the shift.”Walter Hessert
Earlier this week, Centre announced that USDC was returning to cash and cash-equivalent backing after the company integrated much riskier debt instruments for much of the last 18 months. With transparency and reserve liquidity being some of the major issues which often forms the basis of criticism of stablecoin operators, the competition is hotting up, and Paxos stablecoin rebrand is part of the firms vision to become the number one stablecoin in the world.
And the Stablecoin war shows no sign of abating, with major global leaders such as Mastercard actively investigating the role of stablecoin integration, as well as a number of national government’s suggesting that they are interested in investigating the use of the digital assets much more than other crypto’s such as Bitcoin, potentially alongside CBDC’s (central bank digital currencies).
Referencing the fact that Gemini and Paxos were both trust companies, regulated by the New York State Department of Financial Services (“NYDFS”), which require operators to be approved and supervised by the regulator on an ongoing basis, meaning:
- The value of each stablecoin token is tied directly to the value of the US dollar, and the amount of “reserve” dollars equal or exceed the number of stablecoins outstanding.
- Regulators are overseeing the establishment and maintenance of reserves backing the stablecoins.
- Reserves may only be held in the safest forms, such as FDIC-insured bank accounts and in short-term maturity US Treasury instruments.
- Reserves are fully segregated from corporate assets, specifically for the benefit of token holders, and are held bankruptcy remote pursuant to the New York Banking Law.
Releasing a side-by-side breakdown of the reserves of both USDC, Tether against their product, the company goes on to show that the risk between each of the competitors was very one-sided in favour of the Paxos stablecoin
In the USA, stablecoin operators are not currently subject to a standard framework for regulation, instead being regulated within a loose patchwork of state actors, of which the NYDFS is probably the most significant. It’s also worth noting that the New York Attorney General has banned Tether from operating in the State, whilst Circle operates under a Bitlicense granted by the NYDFS.
Federal regulators are said to be “closely monitoring” each firms transparency efforts whilst they work to create a multi-agency strategy for regulation.