Pax Dollar (USDP): Regulated stablecoin for a progressive future

ProductNov 04, 2022
Pax Dollar (USDP): Regulated stablecoin for a progressive future

Like Pax Gold (PAXG), Pax Dollar (USDP) is a fully backed stablecoin and an integral part of the Paxos ecosystem. One of the few digital assets approved by Wall Street regulators, it is versatile and immune to market volatility. Learn about the USDP coin, its strengths, and use cases in our guide.

What is Pax Dollar?

Pax Dollar, formerly known as Paxos Standard (PAX), was launched in 2018. Like Tether and USD Coin, it is a borderless ERC-20 token collateralized 1:1 by US dollars. This stablecoin is also multifaceted, with utilities ranging from commerce to trading to peer-to-peer transactions.

Before 2015, the entity behind Pax Dollar, Paxos Trust Company, LLC, was known as the itBit Bitcoin exchange. It was renamed after the smallest of the Ionian islands. In times of antiquity, Paxos had a peculiar consensus system: its parliament functioned despite the legislators entering and exiting the chamber. Similarly, the minting and burning of Paxos’ flagship asset happens 24/7.

What is USDP?

In 2021, Paxos Standard (PAX) became Pax Dollar (USDP). According to Head of Strategy Walter Hessert, the company changed the ticker to emphasize the connection to USD reserves.

What makes USDP crypto special

Paxos’ vision extends beyond mitigating market exposure risks — to an “open, digital economy accessible to anyone with a smartphone or internet connection.” In this progressive future, blockchain technology is an integral part of the financial revolution, not merely a driving force.

Paxos Dollar facilitates the creation of a seamless and agile global exchange bridging digital and real-world assets. It maintains a 1:1 peg to the US dollar like Tether, but with a few distinctions.

  • The USDP coin is fully regulated and 100% backed by cash reserves. All USD balances are held in accounts at insured depository institutions in the United States.
  • Cash equivalents include US Treasury Bills (with a maturity of 3 months at most) and overnight repurchase agreements. These are short-term, highly liquid instruments that are readily convertible to USD.
  • Not only is Paxos a blockchain ecosystem, but it is also one of the only fully regulated environments of this kind. This umbrella platform hosts multiple crypto products for individuals, institutions, and enterprises. They are fully regulated and offer less volatile exposure to the crypto market than BTC or ETH.
Key milestones in Paxos’ history. Adapted from Paxos
Key milestones in Paxos’ history. Adapted from Paxos

Is USDP stablecoin safe?

Paxos describes USDP as “the world’s leading regulated stablecoin,” giving “unparalleled assurance to customers.” Its key advantages are strict regulatory oversight, protection of customer funds, and easy redeemability.

  • Before launching the stablecoin, Paxos Trust Company secured a trust charter for digital assets from the New York State Department of Financial Services (NYDFS).
  • All cash deposits in Paxos' reserves remain in US banks insured by the Federal Deposit Insurance Corporation (FDIC).
  • Withum, mentioned in Forbes’ list of the best US tax and accounting firms, audits all bank accounts involved in the minting and redemption of the USDP token. An Ethereum smart contract automates both processes.

How does Paxos’ USDP work?

The USDP stablecoin is available on the most popular exchanges. It lets users transfer USD-based assets across borders with enhanced flexibility, better availability, and lower cost than fiat. The fees for buying, selling, and trading USDP are modest, while transactions are instant and non-discriminatory.

Only Paxos Trust Company, LLC may alter the number of USDP in circulation. Unlike the supply of Bitcoin, it is unlimited — the entity may generate as many tokens as it can back. Each instance of minting corresponds to USD deposited in Paxos accounts. Here is how this process works.

  • A user deposits a USD amount (at least 100 USD) into their Paxos account.
  • The Paxos smart contract generates the equivalent amount of USDP. No fee is charged.
  • The minted USDP tokens are transferred to the user’s account.
  • The process of converting USDP back to USD is similar, but the tokens are instantly burned upon completion to remove them from circulation.

Conversion and redemption are free, and holders can get US dollars at any time at a 1:1 ratio. The burning happens immediately upon redemption to support price stability, so the number of tokens left in circulation matches the remaining USD reserves.

Advantages of Pax Dollar

USDP helps the unbanked and anyone who wants to break free from the restrictions of TradFi. Supported by blockchain technology, it offers a stable and decentralized asset with lower risk compared to cryptocurrencies.

Security

As Paxos is a regulated trust, USDP is more secure than most other digital assets. In addition, transactions are quick, efficient, and reliable due to legally approved blockchain technology, extensive monitoring, and surveillance partners.

Furthermore, Paxos engages OpenZepellin’s Pausable contract module. The latter uses tested libraries of Ethereum smart contracts, allowing the issuer to pause approvals and transfers in case of a security threat.

Regulation

Paxos manages USDP according to the “highest standards of consumer protection.” The NYDFS, which provided it with a trust charter for digital assets, is known for rigorous oversight.

Withum conducts monthly audits to ensure that the USD reserves match the token supply. Paxos is legally obliged to maintain a cash equivalent of all USDP tokens in fully segregated, bankruptcy-remote accounts.

Accessibility

Anyone can buy, exchange, and redeem Paxos’ USDP using nothing but a smartphone. Transfers are nearly instant at any time without a bank account.

As a result, USDP holders can redeem their tokens for US dollars at any time. Furthermore, a strict separation between corporate funds and holders’ funds guarantees unhindered access even if the company files for bankruptcy.

1:1 USD peg

The value of USDP relies on the world’s primary reserve currency. Similarly to the gold standard, which tied USD to gold until 1971, every USDP token corresponds to one US dollar held in an insured account.

USDP use cases

Pax Dollar has multiple applications. It mitigates crypto market volatility, supports seamless international transactions, and serves as a trusted means of payment for blockchain-based assets. USDP is accepted by major companies and organizations worldwide, including

  • PayPal
  • Société Générale
  • Credit Suisse
  • Revolut
  • StoneX

Where to buy USDP

This fully regulated stablecoin is available on the majority of popular crypto exchanges. Users can convert US dollars or other holdings to Pax Dollar anytime and explore various use cases. In CeFi, you can buy USDP with a credit card, debit card, Apple Pay, and other payment methods.

USDP price

USDP is faithful to its peg. At press time, it is trading at $1.00, with a 24-hour change of 1.61% and a year-to-date change of 0.02%. It is the 6th stablecoin and 60th cryptoasset by market cap (just over $899 million).

USDP crypto price chart. Source: CoinGecko
USDP crypto price chart. Source: CoinGecko

According to CoinGecko, the token saw an all-time high of $1.13 on October 15, 2018, while its all-time low of $0.863529 came on May 19, 2021. That same month, Coindesk registered a peak USDP price of $1.52, possibly due to rumors of PayPal’s intention to launch its proprietary stablecoin in cooperation with Paxos Trust Company. As Ethereum transactions settle faster than bank transfers, the demand may have risen more quickly than the USD supply.

USDC vs. USDP

Both ERC-20 stablecoins are pegged to the US dollar at a 1:1 ratio. Like USDP, USDC is fully backed by cash and US Treasuries, with redemption possible at any time. The most significant difference is trading volume — USDC is the second-biggest stablecoin. With a market cap of around $43 billion, it dwarfs USDP’s share of under $1 billion.

USDP on CoinLoan

Pax Dollar works with all CoinLoan services — instant loans, wallet, interest account, and exchange. You can buy the stablecoin for fiat or other digital assets or borrow it in a few clicks! Users unlock a competitive APY just by keeping their holdings on our regulated platform.

CoinLoan is constantly evolving to deliver the best-in-class services. We offer flexible crypto investment opportunities and a solid regulatory background. Use USDP in one or more ways:

Pax Dollar loans

If you would like to borrow USDP, explore our instant loans. You can get the stablecoins in seconds by pledging other holdings — for instance, BCH, LTC, XMR, BNB, or SOL.

Alternatively, use the same intuitive feature to collateralize USDP to borrow LTC or XMR. Every loan comes with an adjustable term and LTV ranging from 20% to 70%.

Pax Dollar deposits

Keep your stablecoins in Interest Account and watch your holdings grow. We ensure the highest security standards and competitive yield rates. Choose your option for passive income:

  • 10.3% APY on USDP
  • Up to 12.3% APY on USDP with CLT Staking

Pax Dollar on CoinLoan Exchange

Get Pax Dollar on our exchange, or swap it for fiat or other crypto. We offer a broad range of options, including BTC, ETH, DOT, ADA, and GBP. Our convenient exchange is at your fingertips 24/7. Please note: as updating the ticker takes time, you may see PAX instead of USDP on our platform.

Final word

Pax Dollar is a fully regulated stablecoin boasting NYDFS approval. It belongs to Paxos’ vibrant ecosystem of blockchain-based assets with minimized price risk. On par with Pax Gold and Binance USD, USDP provides a flexible means of payment and a stable store of value with full transparency and secure collateral. Use it with any CoinLoan services — buy, borrow, swap, or deposit USDP in seconds!

Disclaimer:

The information provided by CoinLoan (“we,” “us,” or “our”) in this text is for general informational purposes only. All investment and financial opinions expressed by CoinLoan in this text are from the personal research and open information sources and are intended as educational material. All outlined information is provided in good faith. However, we make no representation or warranty of any kind, express or implied, regarding the accuracy, adequacy, validity, reliability, availability, or completeness of any information in this text.

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