Pax Dollar price prediction: Is regulation key for stablecoins?

Paxos’ stablecoin boasts strong regulatory support backed by reserves

Gear wheels with the words “regulation” and “compliance” written on them – Photo: Shutterstock                                 
Pax Dollar sees regulation as key to the future of stablecoins. Photo: Shutterstock
                                

Contents

Pax Dollar (USDP) is a stablecoin launched in September 2018 by Charles Cascarilla and Rich Teo, co-founders of the regulated blockchain infrastructure company Paxos.

Running on the Ethereum blockchain, USDP is the seventh-largest stablecoin on the market and among the most regulated.

As a stablecoin, the value of each USDP should theoretically remain at $1, barring some minor fluctuations. So in this Pax Dollar price prediction, we’ll look under the hood of Paxos’ stablecoin offering to determine its long-term stability.

Is Pax Dollar safe?

The world’s largest stablecoin, Tether (USDT), is also one of the most controversial cryptocurrencies because of the lack of transparency surrounding its reserves.

Subsequently, stablecoins became the nexus of the crypto regulation debates, resulting in investigations by the US Department of Justice and working groups chaired by the US Secretary of the Treasury. The latest Tether reserves breakdown can be observed below.

Breakdown of Tether’s reserves, showing large amount of short-term debt – Source: tether.to
52% of Tether’s cash and cash equivalents comprises commercial paper, aka unsecured, short-term debt – Source: tether.to

Tether remains unregulated to this day. In an opinion piece, Dan Burnstein, general counsel and chief compliance officer of Paxos, said: “The issuers of these tokens are prioritising yield for themselves over stability and security of the reserves. Because neither token is regulated, the issuers are self-policing.”

By comparison, Pax Dollar:

Paxos releases monthly attestation reports conducted by the independent audit company Withum. Records dating back to September 2018 show that USDP has been backed by either fiat or cash equivalents since the stablecoin’s launch.

The latter point is worth contemplating. USDP reserves are “held in cash and cash equivalents”, suggesting that not all reserves are backed by fiat. This was one of the main criticisms targeted at Tether, when it was discovered that its cash equivalents included short-term commercial debt papers issued by various companies.

Input from Paxos

Currency.com asked Paxos for clarification. Rebecca McClain, a company spokesperson, said: “USDP has never been backed by any debt instruments. All USDP reserves are held in cash and cash equivalents, (namely) US T-bills with less than 90-day maturity.

“USDP has always been backed by only cash and cash equivalents. We cannot change this reserve make-up because Paxos and USDP are both regulated. We must always be backed by cash and cash equivalents only.”

Pie chart showing Paxos’ cash equivalents comprising US Treasury Bills – Source: paxos.com
All of USDP’s cash equivalents are made up of US Treasury Bills – Source: paxos.com

“All USDP reserves are held in segregated FDIC-insured US bank accounts,” added McClain. “All reserves are held bankruptcy-remote. That means in the unlikely case that something were to happen to Paxos as a company, all holders of USDP would be able to redeem their USDP tokens for the full value. This is also unique for privately issued stablecoins.”

Pax Dollar’s smart contracts have an audit score of 96/100 from the leading smart contract auditor CertiK.

Stablecoin as a service

Paxos has built on its experience to create stablecoin protocols for third parties. This “stablecoin-as-a-service" offering is advertised to commercial banks, payment processors, global businesses, crypto exchanges and remittance companies. 

The service has gained traction in Latin America, with stablecoins developed for major Uruguayan and Argentinian digital financial platforms. In a high-profile collaboration, Paxos worked with Binance to create BUSD, Binance’s own fully backed stablecoin.

Stablecoin-as-a-service products are also backed by a combination of cash and cash equivalents.

Price predictions

USDP is a stablecoin and as such, seeking out a Pax Dollar price prediction is theoretically unnecessary. If a stablecoin is working as intended, the value should remain at $1, barring minuscule fluctuations. As such, the Pax Dollar price prediction for 2022, Pax Dollar price prediction for 2025 and the Pax Dollar price prediction for 2030 stays at $1.

USDP: The stats

The total supply of USDP is contingent on user demand. USDP is minted 1:1 in exchange for USD and immediately burned upon redemption. In other words, USDP tokens are only in circulation if their dollar equivalent is in custody. In a recent reading, there were 945,642,940 in circulation, suggesting an equivalent market capitalisation of $947.6m.

FAQs

There are currently 945,642,940 USDP in circulation. The circulating figure is constantly fluctuating, contingent on user demand.

As a stablecoin, Pax Dollar (USDP)’s value generally remains at $1, apart from minor fluctuations. USDP is typically used as an exchange of value rather than a vehicle for investment.

As a stablecoin, the value of USDP typically stays at $1, making a Pax Dollar price prediction unnecessary. If you are thinking of using Paxos’ stablecoin or other offerings, Currency.com recommends researching the company and assessing all available documentation. Currency.com is in no way affiliated with Pax Dollar and this article should not be misconstrued as financial advice.

As a stablecoin, Pax Dollar is not typically used as an investment vehicle, hence why any USDP price prediction will invariably be $1, regardless of timeframe (unless something has gone wrong). For any individual considering using the USDP stablecoin or Paxos’ wider offerings, Currency.com recommends a thorough due diligence check on the company’s credentials and long-term prospects.

Further reading

The material provided on this website is for information purposes only and should not be regarded as investment research or investment advice. Any opinion that may be provided on this page is a subjective point of view of the author and does not constitute a recommendation by Currency Com Bel LLC or its partners. We do not make any endorsements or warranty on the accuracy or completeness of the information that is provided on this page. By relying on the information on this page, you acknowledge that you are acting knowingly and independently and that you accept all the risks involved.
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