PayPal has long been interested in the evolving crypto landscape, but with its recent stablecoin announcement, the payments giant is taking its involvement to the next level.
PayPal, one of the world’s largest online payment systems, has introduced its own stablecoin, called PayPal USD (PYUSD). The ERC-20 stablecoin will be pegged by the “dollar deposits, US treasuries, and cash equivalents.” Upon the rollout, PYUSD is set to launch on Ethereum and is worth $1.
PayPal’s Stablecoin Could be Huge
The stablecoin is a collaborative effort of PayPal and Paxos to revolutionize the digital payment landscape and Web3. According to PayPal, it is designed to be compatible with popular exchanges, Web3 apps, and wallets.
Users can register for the initial $PYUSD distribution by connecting their crypto wallets, such as MetaMask, Ronin Wallet, Coinbase, and Ledger Live.
Users can buy, sell, send, and receive PayPal USD in the app or on the website with zero transaction fee. PayPal also enables customers to convert the stablecoin into other cryptos for a fee.
In the initial phase, buying, selling, holding, and transferring PYUSD are accessible exclusively to eligible US PayPal Balance accounts. But there are plans to extend its remittance support to the Venmo app in the near future.
The introduction of PYUSD is projected to boost its appeal within the cryptocurrency and Web3 sectors, with functionalities like facilitating shopping and crypto token trading. The long-term vision for PYUSD, as expressed by PayPal CEO Dan Schulman in a conversation with Bloomberg, is for it to become an integral part of the broader payments infrastructure.
Schulman is confident that PYUSD will further solidify PayPal’s market dominance in the electronic payments realm by offering users a speedy blockchain-based transfer option that bypasses intermediaries. This ambitious initiative by PayPal and Paxos is poised to shape the future of financial transactions and foster greater convenience for users in the digital age.
Paxos and PayPal announced their partnership in 2020. Back at that time, the two entities reportedly aimed to build innovative crypto products. It appears that the issuance of PayPal’s stablecoin is part of the collaborative efforts.
According to the original plan, the stablecoin was set to launch in February 2023. However, the project faced hurdles and delays due to Paxos’ run-ins with U.S. authorities.
Prior to PayPal USD, Paxos is widely known as an issuer of another stablecoin – Binance USD (BUSD). However, this stablecoin and the company fell under the radar of the U.S. Securities and Exchange Commission.
On February 13, 2023, Wall Street Journal reported that the SEC was prepared to sue Paxos for issuing an unregistered security, in that case, BUSD.
In response to the allegations, Paxos issued a statement to voice disagreement with the SEC. The firm clarified that BUSD was not a security under federal securities laws and segregated from one another and in bankruptcy-protected bank accounts.
Centralization Concern
The news that PayPal would launch a stablecoin was first revealed on August 7, 2023, on the company’s official Twitter account.
The announcement quickly drew a lot of attention from the crypto community, with some people expressing excitement about the potential for the move to boost crypto adoption, while others expressed concerns about the centralization of the project.
Those who favor PayPal’s move argue that it will make it easier for people to buy and use cryptocurrencies.
PayPal has a large user base and that the company’s integration with the traditional financial system will make it easier for people to convert their fiat currency into cryptocurrencies and vice versa. Some also argue that the launch of a PayPal-backed stablecoin will help to legitimize cryptocurrencies and make them more attractive to mainstream investors.
On the other hand, some people have expressed concerns about the centralization of the project. They argue that PayPal is a centralized entity and that the company’s control over the stablecoin could pose a risk to its users.
