USDP (Pax Dollar)

What Is USDP?

USDP (Pax Dollar) is a US dollar-denominated stablecoin issued by Paxos Trust Company, LLC. Originally launched in September 2018 as Paxos Standard (PAX), it was one of the first stablecoins approved by the New York Department of Financial Services (NYDFS). Paxos rebranded the token to Pax Dollar with the USDP ticker in August 2021 to more clearly identify it as a dollar-backed digital asset.

USDP operates on Ethereum as an ERC-20 token and on Solana as an SPL token (added in January 2024 with NYDFS approval). Its circulating supply is relatively modest at roughly $40 million, far smaller than USDC or USDT. However, USDP's significance lies not in market cap but in the regulatory framework it established: Paxos used the same trust company infrastructure to build white-label stablecoin products for some of the largest financial institutions in the world.

How It Works

USDP follows the standard mint and burn mechanism used by fiat-backed stablecoins. Authorized users deposit US dollars with Paxos, which mints an equivalent amount of USDP tokens on-chain. When holders redeem USDP for dollars, Paxos burns the tokens and transfers the corresponding fiat.

1. A customer submits US dollars to Paxos through its platform or API
2. Paxos deposits the funds into segregated reserve accounts at FDIC-insured US banks or purchases short-term US Treasury bills (maturities under 90 days)
3. Paxos mints the equivalent USDP tokens and sends them to the customer's wallet address
4. To redeem, the customer sends USDP back to Paxos, which burns the tokens and wires US dollars to the customer's bank account

Reserve Composition

USDP reserves are deliberately conservative. Paxos holds only two asset types: cash deposits at FDIC-insured US banks and short-dated US Treasury bills with maturities under 90 days. There is no exposure to commercial paper, corporate bonds, or repurchase agreements. This makes USDP one of the most conservatively reserved stablecoins in the market.

Reserves are held in segregated, bankruptcy-remote trust accounts. This means that if Paxos were to face insolvency, USDP holders would have a direct legal claim to the reserve assets rather than becoming unsecured creditors in bankruptcy proceedings. This structure contrasts with stablecoins issued under money transmitter licenses, where consumer protections may be weaker.

Monthly Attestations

Paxos publishes monthly attestation reports for USDP reserves. These attestations are conducted by independent accounting firms in accordance with standards established by the American Institute of Certified Public Accountants (AICPA). The attestor verifies that the total value of reserves equals or exceeds the total supply of USDP tokens outstanding.

From launch through early 2025, attestations were performed by WithumSmith+Brown, PC. Starting February 28, 2025, KPMG LLP took over as the independent attestor, a change approved by Paxos's prudential regulator (NYDFS).

Smart Contract Architecture

On Ethereum, USDP is deployed as a proxy contract, allowing Paxos to upgrade the token logic without changing the contract address. The contract includes supply control functions restricted to Paxos:

// USDP ERC-20 contract on Ethereum
// Proxy: 0x8E870D67F660D95d5be530380D0eC0bd388289E1
// Supply Control: 0xDc55B5F0f2d441C1116DcC3b9D56314Da7f5496D

// Standard ERC-20 interface for interacting with USDP
interface IUSDP {
    function balanceOf(address account) external view returns (uint256);
    function transfer(address to, uint256 amount) external returns (bool);
    function approve(address spender, uint256 amount) external returns (bool);
    function totalSupply() external view returns (uint256);
}

// On Solana, USDP mint address:
// HVbpJAQGNpkgBaYBZQBR1t7yFdvaYVp2vCQQfKKEN4tM

Paxos: The Infrastructure Behind USDP

Paxos Trust Company was founded in 2012 by Charles Cascarilla and Rich Teo, originally operating as itBit, a Bitcoin exchange. In 2015, Paxos received a limited-purpose trust company charter from NYDFS, becoming the first company in New York to obtain a trust charter for virtual currency activities. The company rebranded from itBit to Paxos Trust Company in September 2016.

In December 2025, the Office of the Comptroller of the Currency (OCC) approved Paxos's application to convert its state trust charter to a national trust charter, placing the company under direct federal oversight. This move aligned with the passage of the GENIUS Act in 2025, the first US federal stablecoin legislation, which established requirements for 1:1 reserve backing, monthly disclosures, and bankruptcy-remote treatment of stablecoin reserves.

White-Label Stablecoin Platform

Paxos's strategic value extends beyond USDP itself. The company operates as a regulated stablecoin infrastructure provider, issuing tokens on behalf of major financial institutions using the same compliance framework:

• PYUSD (PayPal USD): launched August 2023, issued by Paxos on behalf of PayPal. Uses the same reserve standards and regulatory oversight as USDP. PYUSD has grown substantially larger than USDP, validating the white-label model.
• BUSD (Binance USD): Paxos issued BUSD under a partnership with Binance. In February 2023, NYDFS directed Paxos to cease minting new BUSD tokens due to unresolved issues related to Paxos's oversight of its relationship with Binance. In August 2025, NYDFS secured a $48.5 million settlement with Paxos for AML deficiencies connected to the Binance partnership.
• USDG (Global Dollar): launched November 2024 from Paxos Digital Singapore, regulated by the Monetary Authority of Singapore (MAS). Features a revenue-sharing model with partners including Robinhood, Kraken, and Galaxy Digital.

Trust Company vs. Money Transmitter

One of USDP's defining features is its issuance under a trust company charter rather than a money transmitter license. This distinction carries significant implications for consumer protection and regulatory oversight:

This regulatory structure is why Paxos positions USDP and its white-label stablecoins as "the safest path for global finance." The trust company framework provides the kind of institutional-grade compliance that traditional financial firms require before integrating stablecoin products.

Use Cases

USDP serves several functions in the digital asset ecosystem, though its primary role has shifted from a consumer-facing stablecoin toward institutional and infrastructure use cases:

• Regulated on/off-ramp: USDP provides a compliant bridge between traditional banking and digital assets, useful for institutions that need a fiat on-ramp with clear regulatory standing.
• Settlement token: the trust company charter and bankruptcy-remote reserves make USDP suitable for settlement between financial institutions that require regulatory certainty.
• DeFi collateral: USDP can be used as collateral in decentralized finance protocols where users prioritize reserve transparency and regulatory compliance over market depth.
• Cross-border transfers: like other fiat-backed stablecoins, USDP enables dollar-denominated transfers that settle on-chain in minutes rather than through correspondent banking networks that can take days.

Why It Matters

USDP's significance in the stablecoin landscape is less about its circulating supply and more about what it represents: a proof of concept for regulated stablecoin issuance. Paxos demonstrated that a trust company could issue a fully compliant, transparently reserved stablecoin under direct banking supervision, then replicate that model for PayPal (PYUSD) and global financial partners (USDG).

As stablecoin regulation matures in the US and globally, the trust company model that Paxos pioneered with USDP is becoming the template for compliant stablecoin issuance. The GENIUS Act of 2025 codified many of the practices Paxos had already adopted: 1:1 reserve backing, monthly attestations, and bankruptcy-remote reserve treatment.

For the broader stablecoin ecosystem, including stablecoin payment rails and platforms like Spark, the regulatory clarity that trust-chartered issuers provide helps build institutional confidence in digital dollar infrastructure.

Risks and Considerations

Centralization and Issuer Risk

Like all fiat-backed stablecoins, USDP is fully centralized. Paxos controls minting, burning, and can freeze or seize tokens at individual addresses. The smart contract includes administrative functions that allow Paxos to pause transfers or blocklist specific wallets. Users who prioritize censorship resistance should understand that USDP does not offer it.

Low Liquidity

With a circulating supply of roughly $40 million, USDP has significantly less liquidity than USDC or USDT. This means fewer trading pairs on exchanges, thinner order books, and potentially higher slippage for large transactions. Paxos's strategic focus on white-label products (PYUSD, USDG) suggests USDP's own supply may remain small.

Regulatory Precedent: The BUSD Episode

The BUSD shutdown demonstrates that regulatory action can abruptly end a stablecoin's minting. While USDP itself was not directly affected, the $48.5 million NYDFS settlement with Paxos over Binance-related AML failures highlights the risks that come with operating under strict regulatory oversight: compliance failures carry real consequences.

Limited Chain Availability

USDP is currently available only on Ethereum and Solana. Compared to stablecoins like USDC (available on 15+ chains) or USDT (10+ chains), USDP's limited blockchain footprint restricts its utility in multi-chain DeFi ecosystems.

This glossary entry is for informational purposes only and does not constitute financial or investment advice. Always do your own research before using any protocol or technology.