PayPal Introduces PYUSD Stablecoin Built On Ethereum Network
Mitchell Nixon
On August 7th, American fintech giant PayPal unveiled a fresh stablecoin named PayPal USD (PYUSD).
This stablecoin, which is pegged to the U.S. dollar, has been brought to life in partnership with Paxos Trust Co. It’s meticulously backed by U.S. dollar deposits, short-term Treasuries, and comparable cash equivalents.
Developed on the Ethereum blockchain, PYUSD is primarily designed to cater to digital payments and the Web3 environment, and it is on the verge of becoming accessible to customers within the United States.
The announcement from PayPal had a notable impact on the market, pushing its shares up by 2.66% on Monday. This move demonstrates a robust display of confidence in the crypto industry, which has encountered regulatory challenges over the past year, compounded by significant collapses.
Even though stablecoins, cryptocurrencies whose value is tethered to a stable asset to mitigate extreme volatility, have existed for several years, they have yet to make substantial inroads into the mainstream consumer payment landscape. Instead, they are primarily utilised by consumers for trading other cryptocurrencies, such as Bitcoin and Ethereum.
Tether stands as the largest stablecoin globally, closely trailed by USD Coin, issued by crypto provider Circle.
With a user base exceeding 350 million, PayPal currently facilitates the purchase, sale, and custody of cryptocurrencies like Bitcoin, Ethereum, Bitcoin Cash, and Litecoin for users in the U.S. and the United Kingdom. Additionally, it allows transactions using these assets.
PayPal’s CEO, Dan Schulman, envisions the new stablecoin integrating seamlessly into the broader payments infrastructure. The company’s intention to introduce a stablecoin was confirmed in January 2022, accompanied by a commitment to collaborate closely with pertinent regulatory bodies.
Amid the array of stablecoins present within the cryptocurrency landscape, PayPal stands out as the pioneer introduced by a prominent payment processor. In a conversation with CoinTelegraph, Charles Cascarilla, the CEO of Paxos, conveyed:
“With the launch of the first stablecoin by a leading financial institution, PayPal and Paxos are proving the real-world value of blockchain technology. PayPal USD is the most significant leap forward for digital assets and the financial industry, and Paxos is proud to enable this transformative product.”
The company stated that the regulatory framework surrounding stablecoins in the U.S. is progressively moving towards greater clarity. Consequently, there exists a demand for a different stablecoin compared to the current options available in the market.
Prior attempts by major mainstream companies to launch stablecoins have met fierce opposition from financial regulators and policymakers. Meta’s (META.O), then Facebook, 2019 plans to launch a stablecoin, Libra, were foiled after regulators raised fears it could upset global financial stability.
A string of major economies, from Britain to the European Union, have since laid out rules to govern stablecoins. The EU’s policies will come into force in June 2024.
“PayPal isn’t quite as polarising as Facebook, but it’s a high-profile name that will surely get attention on Capitol Hill, and from the [Federal Reserve] and [Securities and Exchange Commission],” said Ian Katz, managing director of Capital Alpha Partners, in a note.
Last month, the U.S. House Financial Services Committee also advanced a bill to establish a federal regulatory framework for stablecoins, which will focus on rules for the registration and approval process for stablecoin issuers.
In a statement on Monday, Representative Patrick McHenry, the committee’s Republican chair, said that PayPal’s announcement is an indication that stablecoins “hold promise as a pillar of our 21st century payments system.”
“We are currently at a crossroads to keep America at the forefront of digital asset innovation. Congress is making significant, bipartisan progress on legislation to ensure the U.S. leads the financial system of the future,” he said.
This is a significant step in the right direction.
PYUSD will be used to buy and sell the other cryptocurrencies PayPal offers on its platform, including Bitcoin.
“PYUSD is the first of its kind, representing the next phase of U.S. dollars on the blockchain,” Paxos posted on messaging platform X, formerly known as Twitter. “This is not just a milestone moment for Paxos & PayPal, but for the entire financial industry.”