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Full Report

Scoring Guidelines

Paxos, the issuer of PYUSD, is regulated as a stablecoin issuer by the NYDFS, and therefore subject to stringent guidelines and monitoring requirements. PYUSD is identical in design to its siblings USDP and BUSD.
PYUSD’s reserves comprise overnight reverse repos collateralized by US Treasuries (97%) and cash (3%) in fully segregated accounts.
PYUSD is designed to be institutional-grade, regulatorily compliant and customer protection-focused, but it is not an actively traded stablecoin. It is most suitable for (a) remitting, receiving, and holding funds on PayPal and (b) passive stablecoin holders who want to hold US Dollars but cannot or do not want to hold them in a bank account.

PYUSD's rating can be upgraded from A- to A by:

disclosing its reserve custodians and the amounts held by them OR
maintaining a consistent, tight peg over a 180-day period.

The Stability factor is evaluated on the following:

Reserves Management - Quality, quantity, storage and segregation of reserve assets
Market Feedback - Indicators of market's confidence in a stablecoin derived from price and trade data
Mechanism - Stabilization methods that protect the stablecoin

The Management factor is evaluated on the following:

Restrictions - What deterrents exist to prevent key personnel of stablecoin projects from unethical and illegal behavior?
Negative Track Record - Have key personnel been involved in scams, frauds or other illegal activities?

This factor aims to assess risks arising from technical implementations – i.e, smart contract code and oracles. It is currently not assessed, but we plan for it to be evaluated in the future.

The Decentralization factor is evaluated on the following:

Platform Censorship Risk
Custodian Risk
Type of Collateral
Diversified voting Power
User Censorship Risk

The Governance factor for fiat-backed stablecoins is evaluated on the following:

Holder Protection - What rules, statutes or code exist to protect interests of stablecoin holders?
Reserves Verification - What checks are done to ensure existence of reserves?
Redemptions - Do issuers have transparent and reasonable redemption terms?

This factor seeks to incorporate external feedback mechanisms such as market and social sentiment into our internal ratings. It is currently not assessed, but we plan for it to be evaluated in the future.