Elon Musk-owned PayPal launches dollar, treasuries-backed stablecoin PYUSD for its customers
3 min read 08 Aug 2023, 09:03 AM ISTPayPal launches a new stablecoin, PYUSD, backed by secure assets, allowing customers to buy, sell, hold, and transfer it. A stablecoin is a type of cryptocurrency that is designed to have a stable value.
PremiumUS-based payments major PayPal on Monday announced the launch of a new stablecoin, PayPal USD (PYUSD) which is backed by dollar deposits, US treasuries, and cash equivalents. It will be issued by Paxos Trust Co to PayPal customers in the United States.
"It’s a stablecoin backed by secure and highly liquid assets. As PYUSD rolls out, you’ll be able to buy, sell, hold, and transfer it in our app or on our site," PayPal said.
Elon Musk-owned PayPal's new stablecoin can be easily converted to US dollars whenever needed and can also be used to purchase and sell other cryptocurrencies available on its platform, such as bitcoin.
A stablecoin is a type of cryptocurrency that is designed to have a stable value, typically pegged to a stable asset or reserve, such as a fiat currency like the US dollar or a commodity like gold.
Media reports pointed out that Elon Musk's PayPal has emerged as a trailblazer among major financial technology firms by embracing digital currencies for payments and transfers.
"While stablecoins have been around for years now, they are yet to successfully make headway into the mainstream consumer payments ecosystem. Instead, consumers mostly use stablecoins as a means to trade other cryptocurrencies, like bitcoin and ether. The world's largest stablecoin is Tether, followed by USD Coin, which is issued by crypto provider Circle," a Reuters report said.
The Reuters report pointed out that major mainstream companies' previous attempts to launch stablecoins faced strong opposition from financial regulators and policymakers. For instance, Meta (formerly known as Facebook) faced regulatory concerns in 2019 when it planned to launch a stablecoin called Libra, with fears that it could disrupt global financial stability.
Several major economies, including Britain and the European Union, have introduced regulations to govern stablecoins. The EU's policies will take effect in June 2024. Recently, the US House Financial Services Committee advanced a bill to create a federal regulatory framework for stablecoins, concentrating on rules for registering and approving stablecoin issuers, Reuters reported.
What experts say about PayPal's stablecoin
Denis Sklyarov, Co-Founder and CEO of WiFi Map, a crypto-centric DeWi app, pointed out that the launch of stablecoin by PayPal is aimed at bridging the gap between Web3 and fiat for users, merchants, and developers.
"Nasdaq-listed Paypal has become the first major player to launch its stable coin which can be used for retail purchases, P2P transfer, and wallet-to-wallet transfer. Since PayPal USD is 100 per cent backed by US dollar deposits, it will automatically generate trust among the users and merchants which will enable rapid mass adoption of PYUSD," said Sklyarov.
Sklyarov believes the launch of PYUSD will revolutionise the global payment system and will leverage the emerging potential of stablecoins to address the loopholes in the global financial system.
"The compliant stablecoin will change the way people send money to their friends and families, send remittances, and make international payments a hassle-free experience. The move signals a paradigm shift in the mindset of big companies toward cryptocurrencies and creates an environment of trust and transparency by leveraging the combined strength of Fintech and crypto," said Sklyarov.
"The move will make the financial system more liberal and less dependent on centralized banks. It is important to note that maintaining customer trust will require PayPal to publish regular proof of reserve reports and provide impeccable security for user funds. It will be interesting to see if PYUSD will be compatible with self-custody wallets if users want complete control of their keys and coins. The compatibility with a wider range of wallets and custody platforms will enable faster adoption of PYUSD," Sklyarov said.
Shivam Thakral, CEO of BuyUcoin, India's second-longest-running digital asset exchange said that by launching a new stablecoin tied to the US dollar, PayPal has made a huge advancement in the world of cryptocurrencies.
"This action comes after more than a year of rumours and speculation since PayPal first acknowledged the growth of the dollar-backed stablecoin program. The Ethereum-based stablecoin aims to provide consumers with a reliable and secure method of digital payment," said Thakral.
"PayPal's entry into the stablecoin market highlights the growing acceptance and usage of cryptocurrencies within conventional financial institutions and may pave the way for additional market innovation. We can expect more fintech giants to make a foray into the digital asset market by leveraging the combined strength of digital and traditional finance," Thakral said.
(With inputs from Reuters)
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