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Pax Dollar (USDP) Crypto , Tether’s Fully Regulated Rival
Pax Dollar, formerly known as the Paxos standard Token (PAX), is a highly regulated stablecoin backed by the US Dollar 1:1. The token lives on the Paxos blockchain ecosystem that also hosts other stable cryptocurrencies such as the Pax Gold (PAXG).
The name Paxos was chosen after a legislative consensus system used on the Greek Island of Paxos.
Pax Dollar is looking to establish trust in digital currencies. In general, most cryptocurrencies lack physical backing of any assets which can bring up concerns on how the value of the token is determined.
In addition, cryptocurrencies tend to be volatile which prevents the original intent of being used as a medium of payment. Instead, it is often seen as an investment vehicle instead.
Pax Dollar establishes itself as a highly regulated stablecoin. This is because the coin is under the umbrella of the Paxos group initially known as the Paxos Trust Company.
In addition, they are regulated by the New York State Department of Financial Services and regularly audited by Withum, a reputable audit firm.
Quick Facts
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Pax Dollar is a stablecoin collateralized by the USD at a 1:1 ratio.
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PaxDollar is a token that is established by Paxos, the company that created the Paxos blockchain.
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PaxDollar prides itself on being highly regulated.
What are Stablecoins?
Stablecoins are called “stable” because they are usually backed by the value of fiat currency or other asset classes like gold.
Stablecoins tend to be more resistant to volatility and could even be used as a backup when a crypto crash occurs. Just convert it to a stablecoin so you won’t have to liquidate them into fiat.
In addition, they are also more suitable as a form of payment as they do not fluctuate much in price.
Some popular stablecoins include:
So is Pax Dollar a stablecoin?
Yes it is!
The Fully Regulated Blockchain
Paxos is a fully regulated blockchain infrastructure platform. It is a trust company organized under New York State banking law and regulated by the New York State Department of Financial Services. Thus, it can be said Paxos operates under the highest governing standards.
Paxos obtained a trust charter for digital assets and finally launched Pax Dollar in 2018.
Unlike a bank which generally uses depositors cash for investment purposes, a trust company like Paxos keeps customer funds separate from the corporate account. This reduces concerns for insolvency.
All dollar deposits are held in FDIC-insured U.S. banks or collateralized by U.S. government treasuries. It is backed 100% by cash reserves almost like how fiat currency was once backed by gold reserves.
In addition, Paxos boasts huge partnerships with brands like PayPal, Interactive Brokers and Mercado Libre. These companies have worked together with Paxos to enable payments to be made crypto or for other use cases.
The way that Pax Dollar works is that Paxos accepts dollar deposits and deposits the Pax Dollars that could be traded, transacted or transferred easily with little friction.
Pax Dollar holders can also redeem their tokens for dollars just as easily with zero conversion fees. The token that was redeemed would then be burned and cease to exist.
Is Pax Dollar Better Than Fiat Currency?
Digital assets just like the Pax Dollar are supposed to make the transfer of money seamless without having to go through lengthy bank regulations and verification. This is especially true for cross-border transactions which take way too long.
With Pax Dollar, there is no volatility like Bitcoin but with all the benefits of being blockchain based for efficiency.
Some other benefits of Pax Dollar include:
No middleman
Pax Dollars being issued and redeemed by Paxos without the need for a middleman.
Redemption
Shorter redemption periods (one business day only) and lower fees for transactions
Ethereum wallet-friendly
Can be sent or received by anyone using an Ethereum wallet which reduces human error. This is because it operates according to the rules on the smart contract.
Dollar backed
Backed against the dollar and listed on many exchanges.
No sleeping hours
Available 24/7 for settlement and doesn't have to depend on bank business hours
Where Can We Expect The Use Of Pax Dollars?
Paxos had listed numerous use cases of the Pax Dollar both in current and expected future times. Lets explore some of these:
1. Payment method
This is pretty obvious because Pax Dollars, being always equivalent to one dollar, can easily be used as a means of payment. This is because there is virtually no volatility.
2. Hedge for volatility
During times of volatility, investors can hold their assets in Pax Dollars as these stablecoins don’t fluctuate in value as much as other cryptocurrencies. In the future, Pax Dollars may be used for frictionless and fast settlement of any assets which can include real estate, commodities and securities.
3. Settlement outside bank hours
This is not just beneficial for individuals but also for financial institutions who can settle cash trades outside of the normal hours.
4. Easy market participation
Pax Dollar provides an easy transition for individuals into cryptocurrencies without having to worry about losing their asset value.
5. Adoption of Pax Dollar instead of fiat currency
Paxos hopes that frequent traders will hold their cash in Pax Dollars instead of fiat for their superior liquidity and better utility. In addition, companies with high volume transactions like banks, MNCs and payment processors may find that Pax Dollar allows fast, efficient and lower fees on cross border transactions.
6. Economic freedom
About 5% of the population of the United States which is about 13 million in 2017 did not have a checking, savings or in general, a bank account. This is also something populations in other countries face including significant inflation or volatility of their currencies.
In cases like these, putting their cash in Pax Dollars would help retain the value of their cash and provide economic freedom, no foreign bank accounts needed.
Tether (USDT) vs. Pax Dollar (USDP)
Pax Dollar is often seen as an alternative to Tether, which is the oldest and currently the top stablecoin. They are both backed by the USD, however, they do differ in some aspects:
Cash Reserves
USDT is only backed by 2.9% in cash reserves while the rest is a jumbled mix of cash equivalents, secured loans, corporate bonds and other forms of investments. This means holding one USDT is not exactly equivalent to holding one US Dollar.
In contrast, Pax Dollar is 100% backed by cash making it the perfect alternative to the US Dollar.
Trouble in New York
The New York financial authorities are the strictest when it comes to regulations. Apparently, there were some claims that after an investigation, the New York Attorney General has accused Tether from wrongfully hiding losses. It was here when it was discovered that Tether was not 100% backed by US Dollars. The parent company of Tether, iFinex has to pay losses in the millions and is no longer allowed to operate in New York.
Pax Dollar instead is regulated by the New York State Department of Financial Services and is regularly audited. No trouble for Pax Dollar in New York.
Founder with a Financial Background
Most cryptocurrency and blockchain founders are techies but rarely are they a finance expert. However, the founder of Paxos is.
The founder of Paxos is Charles Cascarilla who is a certified financial analyst by education. He started his venture in the finance world in 1999 as an analyst in Bank of America.
Later, he progressed to Goldman Sachs in 2000. Some other notable companies he had worked for include Claiborne Capital Management, Cedar Hill Capital Partners, Liberty City Ventures and the Association for Digital Assets Markets.
Having a notable reputation in finance has been especially helpful for Charles in having Paxos be a fully regulated blockchain.
Cascarilla has always been very vocal about stablecoins being the future. He has also advocated for the US dollar to develop a digital currency like China’s digital yuan.
How to buy PAX Dollars?
Pax Dollars can be bought on several exchanges which include:
PaxDollar is no longer listed on Binance however you can still go through a DEX (Decentralised Exchange) to buy it.
Find out how here!
If you’re using BitPay, you can buy Pax Dollar with a credit card with four easy steps:
1. Get the BitPay app.
You can download it on your phone or on the desktop. Its available for Android, iOS, Mac, Windows and Linux.
2. Tap on the “Buy Crypto” link.
Bitpay supports the purchase of Pax Dollar.
3. Choose the amount
Select an amount of Pax Dollar you would like to purchase.
4. Choose your payment method
If you’re using a credit card, select your credit card. You can also use a debit card or Apple Pay.
Final Thoughts on Pax Dollar (USDP)
USDP is a stablecoin that essentially prides itself on being regulated, stable and 100% backed by cash. It is regulated to “the highest standard of consumer protection”.
The Paxos company is also backed by reputable partners which include Google and Bank of America. The team behind the Pax Dollar are well versed in finance and regulations which makes Pax Dollar a trustworthy token.
USDP is best used as a medium of exchange due to its stable nature and minimal volatility.
Its security system is top notch with multiple layers of security which include blockchain, transaction monitoring and surveillance partners to reduce risk and ensure compliance.
They are also audited by Withum which is a reputable audit firm.
Paxos implements the use of OpenZeppelin’s Plausable contract module for its smart contracts allowing them to pause any transactions in case there is suspicious activity involved.
Besides, the risk of insolvency is almost non-existent in the case of Paxos as corporate funds are kept separate from token holder funds in a bankruptcy- remote account.
An obvious downside to Pax Dollar could be its centralized nature due to the regulatory compliances. However, this is essential to ensure the token is trustworthy in their opinion.
Considering all these reasons, Pax Dollar seems like a nice way for beginners to get started in cryptocurrency by investing in a reputable stablecoin with almost zero volatility.
Investors can rest easy knowing that you can always redeem one USP for one dollar. The cryptocurrency makes a viable hedge against dollar inflation, economic uncertainty and risks with crypto such as volatility.