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PayPal’s Crypto Stablecoin PYUSD Launched

PayPal's Crypto Stablecoin PYUSD Launched

PayPal's Crypto Stablecoin PYUSD Launched

PayPal, the American fintech giant, has entered the crypto stablecoin market with the launch of its own digital currency called PayPal USD (PYUSD). The new stablecoin is backed by the U.S. dollar and aims to facilitate digital payments and Web3 applications. In this article we will see what is PYUSD, the technology used behind it, why PayPal launched a stablecoin and how PYUSD is different from other stablecoin.

What is PYUSD?

PYUSD is a centralized crypto stablecoin that is pegged to the U.S. dollar and issued by Paxos Trust Co., a New York-based crypto financial services firm and blockchain platform. PYUSD is built on Ethereum, the leading smart contract platform, and follows the ERC-20 standard, which means it can interact with other Ethereum-based tokens and applications.

For context, a stablecoin is a digital token whose value is pegged/tied to another currency/ commodity/ financial instrument. A centralized stablecoin is a token issued by a centralized entity who is responsible for minting and burning of that token as per demand and supply.

PYUSD is fully backed by U.S. dollar deposits, short-term Treasuries, and similar cash equivalents that are held in reserve by Paxos. This means that PYUSD holders can always redeem their tokens for the U.S. dollar at a 1:1 ratio. PYUSD also maintains a constant value of $1, unlike other cryptocurrencies that are volatile and fluctuate in price.

PYUSD is designed for digital payments and Web3, which refers to the decentralized and open web that is powered by blockchain technology. PYUSD can be used as a medium of exchange, a store of value, and a unit of account for various online transactions and services. PYUSD can also be exchanged for other cryptocurrencies on PayPal, such as Bitcoin (BTC), Ether (ETH), Bitcoin Cash (BCH), and Litecoin (LTC).

How to get PYUSD and where to use it?

PYUSD will be available soon to U.S. customers who have a verified PayPal account. Users will be able to buy, sell, and hold PYUSD on PayPal’s platform, as well as transfer it between PayPal and Venmo, another popular payment app owned by PayPal.

PYUSD will also be accepted as a mode of payment for various purchases on PayPal’s network of over 350 million active users and 30 million merchants worldwide. Users will be able to pay with PYUSD without any fees or conversion rates, as well as enjoy the benefits of PayPal’s security and customer protection.

In addition, PYUSD will enable users to access the Web3 ecosystem and participate in various decentralized applications (DApps) that run on Ethereum. Users will be able to use PYUSD for lending, borrowing, trading, gaming, art, social media, and more.

Why did PayPal launch PYUSD ?

Source : PayPal

PayPal launched PYUSD as part of its bid to become a crypto payment giant and a leader in the digital economy. The company started offering crypto services in 2020, allowing users to buy, sell, and hold cryptocurrencies on its platform, as well as enabling payments in crypto assets.

PayPal CEO Dan Schulman said that PYUSD is a significant leap forward, stating :

“The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar. Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.” 

Dan says he hopes PYUSD will become a part of the overall payments infrastructure. He also said that PayPal is working closely with relevant regulators to develop a stablecoin that meets the highest standards of compliance and oversight.

Also, stablecoin business is a highly profitable and safe business as the company can earn a good yield on the US government debt(which is considered to be world’s most safe store of value) it has been holding.

What are its benefits?

PYUSD has several benefits over other stablecoins and traditional payment methods. Some of these benefits are:

PYUSD competitors and how it can be different from them

The crypto stablecoin market has a $126 billion circulating supply dominated by Tether-issued USDT with an $86.5 billion market cap followed by Circle-issued USD Coin (USDC) with a $26 billion market cap. However, most of these stablecoins have faced regulatory hurdles in the U.S. lately, as policymakers are discussing a stablecoin bill with a bipartisan approach.

PayPal will be the first stablecoin launched by a payment processing giant. USDT and USDC on the other hand are used majorly for leverage trading and in Defi respectively, Paypal with its wide network and ability to provide customers the infrastructure to use PYUSD for online shopping and P2P payments can prove to be a value point.

Also unlike USDT, PayPal said it would provide attested reports of the funds backing the stablecoin ensuring transparency and safety. In a direct quote from company :

“Beginning in September 2023, Paxos will publish a public monthly Reserve Report for PayPal USD that outlines the instruments composing the reserves. Paxos will also publish a public third-party attestation of the value of PayPal USD reserve assets. The attestation will be issued by an independent third-party accounting firm and conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants (AICPA)”

Author’s Take

The high yield on US government debt has attracted many companies to issue their stablecoins. While PYUSD is built on Ethereum their are still challenges that might come in PayPals way.For example :

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