By Mark Hunter
16 hours agoTue Aug 08 2023 08:02:15
Reading Time: 2 minutes
- PayPal has launched PYUSD, a stablecoin backed by USD deposits, aiming to boost digital token adoption
- With PYUSD, PayPal seeks to strengthen its digital payment leadership by enabling faster and cheaper transfers.
- This move comes amid increasing demand for alternative stablecoins and evolving regulatory clarity in the cryptocurrency landscape.
PayPal has unexpectedly joined the stablecoin race by launching its own dollar-backed effort, PYUSD. The stablecoin is underpinned by Paxos, which until recently was tasked with minting Binance’s BUSD stablecoin, and is backed by a combination of US dollar deposits, short-term Treasuries, and equivalent cash assets, the San Jose-based payments giant on Monday. The primary aim of the initiative is to increase the use of digital tokens for everyday payments while making the most of blockchain technology to facilitate swift and cost-effective transfers.
Departing CEO Sees Stablecoin Dreams Come True
PayPal announced the launch of PYUSD yesterday, marking the biggest development since the company first moved into the crypto realm in 2020. Dan Schulman, CEO of PayPal, articulated the broader strategy behind PYUSD’s introduction, envisioning the stablecoin as a foundational element of an overarching payments infrastructure. Schulman, who is set to step down in the upcoming months, and clearly wants to leave with the company’s crypto plans well advanced.
PayPal’s use of stablecoins could see it move more into the mainstream having been predominantly confined to use by moving assets across exchanges, with limited integration into consumer-oriented payment systems. CoinGecko data indicates a collective value of approximately $126 billion in circulating stablecoins, with Tether’s USDT dominating the landscape.
PayPal Learns From Prior Failures
Notably, the emergence of stablecoins hasn’t been devoid of controversy. An ill-fated effort by Meta Inc. faced significant regulatory hurdles, leading to its abandonment last year. PayPal itself temporarily suspended its work on PYUSD in February due to heightened regulatory scrutiny over cryptocurrencies.
The company’s perspective on regulatory conditions has since evolved; Jose Fernandez da Ponte, head of PayPal’s blockchain and digital currencies division, expressed optimism about the evolving regulatory landscape, citing increasing demand for an alternative stablecoin, given the current market’s concentration.
The launch of PYUSD, in conjunction with PayPal’s established cryptocurrency services, marks a strategic move to maintain the company’s dominance in digital payments. PayPal currently boasts more than 431 million active accounts worldwide and, since 2020, facilitates the buying, selling, and payment processes for several cryptocurrencies, including Bitcoin.
Tether Welcomes the Competition
While the unveiling of PayPal’s stablecoin has raised questions about its potential impact on existing stablecoins like USDT, Tether’s Chief Technical Officer, Paolo Ardoino, stated that its launch in the US market should not influence USDT. He further emphasized that the introduction of another stablecoin could positively contribute to the growth of the cryptocurrency industry as a whole and encourage sensible regulations.
Ardoino also pointed out that PayPal’s PYUSD might challenge existing competitors in the space, potentially impacting companies like Circle and its USDC stablecoin, which focuses chiefly on the US market. Ardoino suggested that Tether’s strategic focus on emerging markets and developing countries might shield it from immediate competitive pressures stemming from PayPal’s new offering.
There is more truth in the sediments of the coffee prepared by an Italian granma, than in most of Verge articles. https://t.co/BnpJTiHgIz
— Paolo Ardoino 🍐 (@paoloardoino) August 7, 2023
As PayPal endeavors to reshape the digital payment landscape with its innovative stablecoin, industry players and regulators alike will be closely observing the dynamics that unfold, particularly in relation to market expansion and regulatory engagement.
