Is the Pax Dollar (USDP) the future of Cryptocurrency?
I think the Pax Dollar (USDP) shows the future of cryptocurrency and decentralized finance (DeFi). To explain, the USDP stablecoin is stable, transparent, government-regulated, and backed by boring conventional investments.
Mr. Market agrees, the Pax Dollar was CoinMarketCap’s most-trending cryptocurrency on 2 August 2023. CoinMarketCap gave the Pax Dollar a $506.610 million Market Capitalization, a $506. 288 fully Diluted Market Cap, an $8.314 million 24-Hour Market Volume, and a 99.45₵ Coin Price on 4 August 2023.
The Pax Dollar is a stablecoin. A stablecoin is a cryptocurrency that contains a smart contract. A smart contract is a blockchain app that pays in fiat currency when you spend the stablecoin. The Pax Dollar pays in US dollars held in bank accounts.
The Dollar gives Pax its Value
They back the Pax Dollar (USDP) with cash (US Dollars) and US Treasury Debt. Hence, two of the world’s simplest, most-boring, fool-proof, and most-proven assets back the Pax Dollar. Interestingly, it is the all-mighty dollar that is the basis of Pax’s popularity.
The US Dollar (USD) is the world’s most-used currency. For example, there was $2.333 trillion in USD in circulation during the week of 26 July 2023, the Federal Reserve estimates. The volume of dollars in circulation was $2.776 trillion during the week of 3 August 2022.*
“The U.S. dollar is overwhelmingly the world’s most frequently used currency in global trade,” the Federal Reserve reports. For example, US Dollar transactions comprised 96% of trade invoices in the Americas between 1999 and 2019, the Fed estimates. Additionally, dollar transactions comprised 74% of Asia-Pacific trade invoicing, and 79% of trade invoices in the rest of the world in 2019-2019.
Pax Dollar (USDP) profits from Dollar Domination
The only places where the dollar does not dominate trade are Europe and Russia. In Europe, 66% of trades were in Euros in 1999-2019. They settled over 80% of Russia-China trade transactions in Chinese yuan in June 2023, Russian President Vladimir Putin claims.*
They settle most cross-border transactions in dollars because the US Dollar is the world’s reserve currency. To elaborate, the reserve currency is the fiat currency financial institutions and businesses use for cross-border transactions. Historically, the reserve currency is the fiat currency of the world’s most powerful nation.
Notably, the US dollar became the reserve currency in 1945, when the United States and its allies won World War II. However, there is speculation that the yuan could become the reserve currency as Chinese power grows. Notably, financial systems in many countries, including Russia, Brazil, Bolivia, Argentina, and Pakistan, now support financial transactions.
However, I think it will take decades for the yuan to supplant the dollar. Unless a Black Swan event, for example civil unrest in the United States, destroys the dollar. For instance, the Nazi victory in the 1940 Battle of France destroyed the last Reserve currency, the British pound sterling.
How Safe is the Pax Dollar (USDP)?
The Pax Dollar (USPD) is popular because its creator, Paxos, can guarantee payment in US dollars. A Pax Dollar can make dollar payments because cash and US treasury debt back it.
On 30 June 2023, backed Pax Dollar with Total Cash Deposits with a current market and notional position value of $195.798 million, Paxos reports. They kept around $185.5 million of that cash in FDIC insured placement networks (bank accounts) and $10.298 million of that cash in other deposits and insured depository institutions.
Additionally, Paxos backs USPD with US Treasury Totally Collateralized Repurchase Agreements with a $785.400 million current market value on 30 June 2023. Those Totally Collateralized Repurchase Agreements had a Notional Position Value of $770 million on 30 June 2023.*
Is the Paxos Dollar (USPD) Safe?
Therefore, Total Net Assets with a Current Market Value of $1.006 billion and a Notional Position Value of $990.701 million backed Paxos USD on 30 June 2023. Conversely, there were 986.891 million USPD tokens issued outstanding on 30 June 2023.*
The Paxos Trust Company self reports its portfolio five at the beginning of each month. WithumSmith+Brown, PC, an independent third-party accounting firm issues Paxos attestation reports each month. Withum’s conducts examinations in accordance with attestation standards established by the American Institute of Certified Public Accountants (AICPA).
Paxos submits to regulatory oversight by the New York State Department of Financial Services. However, the US Federal (national) government does not regulate Paxos. Notably, the US Securities and Exchange Commission (SEC), the US Treasury Department, and the Federal Reserve do not regulate the Pax Dollar.
The Future of DeFi is Safe and Boring
Hence, you can call the Paxos Dollar regulated and transparent. Furthermore, Paxos’ clients include Bank of America (BAC), PayPal (PYPL), MasterCard (MA), Nomura, Societe Generale, and America’s largest privately held company, Koch Industries.
Paxos’ other products include Binance USD (BUSD) and Pax Gold (PAXG). Binance is a stablecoin issued by Binance but administered by Paxos. CoinMarketCap estimates BinanceUSD was the fourth-largest stablecoin with a $3.537 billion Market Cap and a $1.25 billion 24-Hour Market Volume on 4 August 2023. In contrast, the Pax Dollar was the seventh-largest stablecoin on 2 August 2023.
I think, the Pax Dollar’s popularity shows people are seeking boring and safe DeFi products. Hence, boring and safe is the future of cryptocurrency and DeFi.
*https://ycharts.com/indicators/us_currency_in_circulation#:~:text=Basic%20Info,2.51%25%20from%20one%20year%20ago.
*https://www.federalreserve.gov/econres/notes/feds-notes/the-international-role-of-the-us-dollar-post-covid-edition-20230623.html
*https://www.globaltimes.cn/page/202306/1292737.shtml
*https://paxos.com/wp-content/uploads/2023/07/USDP-Monthly-Stablecoin-Reporting-June-2023-1.pdf
Click to access Paxos-Examination-Report-June-2023.pdf
