Paxos’ $1.5B USDP at MakerDAO to Raise its Debt Ceiling

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  1. The debt cap of Paxos’ Pax USD stablecoin has been raised to $1.5B thanks to MakerDAO.
  2. Increased demand for Paxos’s stablecoin would result in a bigger pool of collateral.
  3. MakerDAO has already come to terms with Gemini in a similar arrangement.

Paxos, a multi-faceted financial infrastructure company that issues the seventh-largest stablecoin in the cryptocurrency market, plans to deposit up to $1.5 billion worth of its USDP stablecoin into Maker’s Peg Stability Module (PSM). 

This is a component of the protocol that holds reserves backing its DAI stablecoin and enables fee-free swaps to other stablecoins such as USDC and GUSD.

Sam MacPherson, who works on the Protocol Engineering team at Maker, told The Defiant that Paxos profits from the agreement since it is generating money on the conventional financial assets that back USDP. 

Increased demand for Paxos’s stablecoin would result in a bigger pool of collateral, from which the business would receive extra money. This is because Paxos backs USDP with U.S. Treasuries, whose yields are continuing to grow.

Paxos has extended an offer to Maker to pay 45% of the current Federal Funds Rate, which sits at 4.3% as of this writing, on any and all USDP that is placed in the PSM. According to MacPherson’s estimations, the arrangement has the potential to bring in around $70 million yearly for Maker.

It is essential to keep in mind that MakerDAO has already come to terms with Gemini and its GUSD stablecoin to enter into a similar arrangement. The DAO was supposed to receive fees for every GUSD that exceeded the threshold of $100 million when the deal was first made. Since then, this limit on the total amount of debt has been raised to $500 million.

The recent difficulties that Gemini and its Earn program have been enduring, on the other hand, call this collaboration into doubt. The DAO just finished a vote on whether or not to reduce its exposure to Genesis.

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Godfrey Mwirigi is an enthusiastic crypto writer with an interest in Bitcoin, blockchain, and technical analysis. With a focus on daily market analysis, his research helps traders and investors alike. His particular interest in digital wallets and blockchain aids his audience in their day-to-day endeavors.

programmer & freelance writer