– TIMESTAMPS –
0:00 Intro
2:04 What Are Stablecoins?
5:26 Tether USDT Reserves
7:56 Circle USDC Reserves
10:32 Paxos BUSD PAX Reserves
12:10 What Are The Assets Backing Stablecoins?
14:30 Which Stablecoin Has The Best Collateral?
17:14 Conclusion
Generally speaking, there are three types of stablecoins: fiat backed, crypto backed, and algorithmic. All of them ultimately maintain their dollar pegs by adjusting their supply based on demand
Fiat backed stablecoin issuers have historically not been very transparent about whether their tokens are fully backed by dollars
This has led to a lot of stablecoin competition in the crypto space, with each new fiat backed stablecoin company claiming that its tokens are backed by more dollars than its competitor’s tokens
🕵️♂️Tether USDT Reserves🕵️♂️
According to Tether, the USDT in circulation is backed by the following assets: 76% Cash, Cash Equivalents, Short Term Deposits, and Commercial Paper, 12.5% secured loans, 10% corporate bonds, funds, and precious metals, and 1.5% other assets, including digital tokens, AKA cryptocurrency
⭕Circle USDC Reserves⭕
According to Grant Thornton, the USDC in circulation is backed by the following assets: 61% cash and cash equivalents, 13% Yankee certificates of deposit or CDs, 12% US treasuries, 9% commercial paper, 5% corporate bonds, and less than 1 percent in municipal bonds
🏦Paxos BUSD PAX Reserves🏦
According to Withum, 96% of all Paxos stablecoins are currently backed by cash or cash equivalents, with 4% being backed by US treasuries
🤔What Are The Assets Backing These Stablecoins?🤔
Almost all of the assets backing the largest stablecoins are some form of debt, i.e. money that’s been lent out. If you’re wonder why all these stablecoin companies are holding so much debt, the answer is interest. The companies behind these stablecoins can make money on their clients’ money by lending it
🤼♂️Which Stablecoin Has The Best Collateral?🤼♂️
Tether’s account of what’s backing USDT should be taken with a grain of salt. That’s because they simply posted a pie chart without oversight from any accounting or auditing firm
While Paxos and Circle do provide attestations of their reserves on a monthly basis, an attestation is not the same as an audit
An attestation is just when a third party verifies the information being shown to them. An audit is when a third party actually goes digging through all the paperwork to see what’s not being shown to them
This is the biggest difference between Paxos and its two contemporaries is that it is a regulated trust, and that’s why such a large percentage of Paxos’ reserves are made up of cash and cash equivalents
Even if all their cash equivalents are debts of some kind, they are a form of debt that can be quickly redeemed for dollars regardless of market conditions. This makes Paxos’ stablecoins the best
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📜 Disclaimer 📜
The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial legal or tax advice. The content of this video is solely the opinions of the speaker who is not a licensed financial advisor or registered investment advisor. Trading cryptocurrencies poses considerable risk of loss. The speaker does not guarantee any particular outcome.
