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Paxos Offers Steady Fee to MakerDAO for $1.5B USDP Reserves

Paxos is set to offer MakerDAO a steady fee aligned to the decentralized finance firm to generate income on its $7 billion digital asset reserve. As a stablecoin issuer, Paxos is offering a fee to MakerDAO as the custodian of $1.5 billion Pax USD (USDP).

Paxos’ proposal captured within the MarkerDAO’s governance forum solicits the increment of the maximum amount from the present $450 million to $1.5 billion USDP within the peg stability module utilized to support the Maker’s reserve system. 

Paxos Targets to Optimize Reserve Facility

The proposal indicates that in exchange, Paxos would settle the marketing fee daily established upon the 45% Effective Federal Funds Rate (EFFR) currently approximated at 4.3% annually. However, Paxos clarified that they would settle the daily fee if the Market were to lift the debt ceiling to $1.5 billion. It projected the maximum threshold to raise to $2 billion USDP by 2024. 

Paxos’ proposal anticipates that utilizing the reserve facility at its full capacity would yield an additional $29 million annually for Market. The MakerDAO community is set to discuss before subjecting the proposal to a vote. 

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USDP involves a stablecoin pegged to the US dollar through matching cash and cash equivalent of the government debt instruments. According to independent attestations, Paxos and USDP operate as regulated by the New York Department of Financial Services (NYDFS). As a regulatory-compliant firm, Paxos disclosed to NYDFS plans to pass a portion of its earnings from the government bonds supporting USDP to the Maker. 

Proposal Matches MakerDAO’s Recent Initiatives

The proposal aligns with the MakerDAO’s recent efforts to end dependence on Circle’s USDC. Also, it suits MakerDAO’s plan to boost the platform’s earnings through increased investment in government bonds. The project identified as Endgame Plan is credited to Rune Christensen, though ratified later in an October vote. Accomplishing secondary investment will enable MakerDAO to realize steady earnings from the 7 billion crypto pile within its reserves.

The project builds upon the MarkerDAO initiatives in 2022 to explore other income yield channels. In particular, the protocol’s community voted favorably to approve the increment of DAI’s reward to an annual rate of 1%. Further, MarketDAO will redistribute the income to token holders.

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It is unsurprising for Paxos’ to propose a generous offer considering recent dramatic voting where the MakerDAO community retained Gemini’s USD (GUSD) among the stablecoin for the DAI’s reserve asset. 


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Stephen Causby

Stephen Causby is an experienced crypto journalist who writes for Tokenhell. He is passionate for coverage in crypto news, blockchain, DeFi, and NFT.

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