Paxos Mints $10 Million in Stablecoin Following Tether Allegations
Paxos has minted over $10 million of its Paxos Standard stablecoins, a few hours after the leading stablecoin provider, Tether, was notified of a lawsuit by the New York State Attorney General. This latest development could be a move by Paxos to gain one over its rival and become a healthy alternative for cryptocurrency exchanges.
Increase in demand led to minting
The Chief Executive Officer of Paxos, Chad Cascarilla, reveals that there has been an increase in order for the Paxos Standard stablecoin which led to the company minting more of the tokens. The minting happened on throughout Thursday and overnight as well, which was just a few hours after the New York AG’s office revealed another scandal by Tether and Bitfinex.
Cascarilla pointed out that the surge in demand is definitely a reaction to the new considering the fact that PAX started trading at a premium price compared to the USDT and the US Dollars shortly afterward.
He pointed out that the increase in demand led the company to mint more of the stablecoin tokens. Cascarilla stated that Paxos doesn’t pre-mint the PAX. Thus, the volume of the stablecoin goes up or down depending on the market demand for the PAX. He further reiterated that the surge in demand has to do with the Tether news as more traders and investors would seek out alternatives due to the controversies around the USDT stablecoin.
Data gathered from blockchain data reveals that 13,737,199.87 new PAX were minted. However, 3,354,741.74 were redeemed, with the others having a net worth of $10 million. A large percentage of the new coins (13,158,288.4) were minted a few hours after the Tether news broke out while the others were created prior to that.
The USD coin, which is a regulated stablecoin created by the Centre consortium of Circle and Coinbase follows Paxos in experiencing an increase in demand following the Tether news. The developers minted 8,276,917.27 new tokens a few hours after the news broke.
On Thursday, the New York AG’s office claims that cryptocurrency exchange Bitfinex lost $850 million of both corporate and customer funds to Crypto Capital, the Panama-based payment processing company that handles their transactions. The cryptocurrency exchange made up for the loss with funds from Tether, the company behind the USDT stablecoin which claims its tokens in circulation were backed by the US Dollars.
Tether controversy remains
Tether has been one of the most controversial cryptocurrency companies over the past few years. The stablecoin issuer has maintained that each of its 2.8 billion tokens in circulation is backed 1:1 to the US Dollar.
However, the allegations on Friday puts into question the claims made by the company. It is worthy to note that Tether didn’t address its customers regarding the funds shifted to Bitfinex, which severely affects their claim of having $3 billion in holdings.
The lack of transparency with Tether has seen traders and investors dump it for other stablecoins. Data compiled from TokenAnalyst.io shows that other stablecoins aside USDT have been experiencing massive volume increase over the past few hours, with most of them trading at a premium price.
While Tether dropped to $0.99 per coin, other stablecoins like PAX, USDCoin, the GUSD, TrueUSD, and DAI are all trading higher than their usual price. The chief executive of Strix Leviathan, a trading tech firm, Jesse Proudman, pointed out that the recent against iFinex and Crypto Capital does raise serious questions regarding the reserves supposedly backing the USDT stablecoin.
He added that it is expected that the lawsuit could lead to capital moving from Tether to the other regulated fiat stablecoins including OAX, DAI, USDC, TUSD, and the USDS.