August 9, 2023, 9:03 am | Read time: 3 minutes
Quietly, PayPal has launched its own stablecoin, PYUSD, with the help of the U.S. company Paxos–a real surprise coup. TECHBOOK explains the benefits and changes this brings.
Without much rumor beforehand, PayPal has managed to introduce its own stablecoin. A stablecoin is a crypto asset that mirrors the value of a regular currency 1:1 on the blockchain. In this case, it reflects the value of the U.S. dollar on the Ethereum blockchain. So, one PYUSD equals one dollar. But what does it offer users?
The news of PayPal’s PYUSD launch has sparked controversy in the crypto scene. The presumed effect on the acceptance of cryptocurrencies is viewed positively. However, some details are seen negatively. Initial code analyses suggest that PYUSD can be frozen by PayPal in extreme cases. This wouldn’t be surprising, as PayPal, unlike other stablecoin providers, targets a fully regulated market. In cases of criminal activity, lawmakers want to be able to act. PayPal must comply with this to make its stablecoin politically feasible.
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Why a PayPal Stablecoin?
For the average consumer, this discussion is hardly relevant. Even today, assets in euros, dollars, and other currencies can be frozen on suspicion of money laundering. Therefore, PayPal users are more likely to wonder what additional value PYUSD brings to everyday life.
Since the new stablecoin will initially only be available in the U.S. market, local consumers have plenty of time to study its pros and cons and everyday usability from afar. In principle, PYUSD should be available for purchase both in the app and on the website.
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The advantages of a stablecoin are clear. On one hand, PYUSD will be a link to the entire crypto ecosystem. It allows users to quickly and easily transition from the fiat money system to the crypto world. The exchange path from euros to Bitcoin and other cryptocurrencies and back will be, so to speak, a small step shorter.
On the other hand, PYUSD can be self-custodied using a crypto wallet. No bank, no account, not even PayPal is needed to send and use it. It can be carried, so to speak, in an electronic wallet in your pocket. It is already certain that many businesses and online platforms will soon be open to accepting PYUSD.
How Secure is the PYUSD?
Unlike algorithmic stablecoins, which are backed by crypto, PYUSD is backed by U.S. dollars, U.S. bonds, and equivalent assets. Thus, the maximum possible security is provided.
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The largest stablecoins on the market so far, USDT, USDC, and DAI, face strong competition overnight from PayPal’s offering. Whether PYUSD will indeed become a success story is now being watched with great anticipation by many experts. Many crypto enthusiasts hope that PayPal’s stablecoin will mark the beginning of the long-awaited global mass adoption of cryptocurrencies.
PayPal itself hopes this coup will help it regain its once-uncontested dominance in the payment service provider market. Whether competitors will soon come up with similar ideas remains to be seen.