Paxos and TrueUSD trades at a premium against Tether

A week ago, Binance listed PAX/USDT pair, which now allows customers to directly convert Tether, an unregulated stablecoin, to Paxos, a regulated stablecoin that is approved by New York State Department of Financial Services (NYDFS). Binance also lists TUSD/USDT pair, which lets people directly trade Tether for TrueUSD. TrueUSD is administered by an entity that is registered as MSB by FinCEN. Unlike Tether, both Paxos and TrueUSD are redeemable 1:1 for the U.S. dollar and the reserves are frequently attested by auditing firms.

Around 1 am UTC, both PAX/USDT and TUSD/USDT pairs saw a sudden uptick in price, which led to both Paxos and TrueUSD trading at as much as 4% premium. This comes at a time when rumors are emerging that Bitfinex, and its affiliated firm Tether, could face insolvency amid reports that its reported banking partner Noble International was no longer working with the firm. On Monday Bitfinex strongly refuted these claims saying: “Bitfinex is not insolvent, and a constant stream of Medium articles claiming otherwise is not going to change this.” While it is rumored that Tether has struck a relationship with Deltec Bank based in The Bahamas, it is still unclear at which bank Tether is currently holding its reserves.

At press time, PAX/USDT is still trading at $1.02 and TUSD/USDT is trading at $1.03. There is limited upside to holding an unregulated stablecoin with an opaque history when a regulated stablecoin is just one trade away. It is not immediately clear what caused the premium to increase in the last several hours but it will be interesting to watch whether Paxos and TrueUSD will sustain it.


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About Author

Larry joined crypto research full time in early 2017 and has expertise in capital markets, market structure and early stage DeFi companies/protocols and token economics. He has a background in economics and finance.