PayPal Moves into the Cryptocurrency Space with Launch of PYUSD Stablecoin
Founded in 1998, PayPal has continued to grow at a staggering rate over the years and is now one of the leaders of the financial technology sector, as well as a household name. In its early years, most of the people familiar with PayPal would have been using it as part of the auction process on sites like eBay, with it providing payment security to both sellers and buyers. Years later, PayPal has since become a payment processor for online businesses around the world, offering fast and easy ways for customers to pay for products and services. Furthermore, PayPal has allowed its users to access credit facilities, transfer money to individuals and businesses, send and receive invoices, and lots more.
However, what many people may not know is that PayPal took another big step in August 2023, announcing the launch of its U.S. dollar stablecoin, PYUSD. This is certainly a move that highlights PayPal’s commitment to continued innovation and growth within digital finance. Yet, what are the ins and outs of PYUSD, and what will it mean for the future of PayPal and its customers?
The History of PayPal’s Relationship with the Crypto Industry
PayPal has had a longstanding interest in the crypto industry that was publicly acknowledged as early as 2013 when then-president David Marcus spoke about his interest in Bitcoin. In 2014, the company released a promotional video that again referenced Bitcoin integration, but this was later edited to remove any mention of crypto.
The first proper relationship between the company and the crypto industry emerged in late 2014 when PayPal allowed online vendors to accept Bitcoin payments through the platform. This was achieved through a partnership with Coinbase, GoCoin, and BitPay.
In 2018, the company linked up with Coinbase and allowed U.S. customers of the latter to withdraw any fiat funds on the platform into their PayPal accounts. This link to the crypto industry continued to develop in 2020 when PayPal launched a service that allowed users to buy and sell cryptocurrencies. Following that, PayPal then added a feature that allowed its users to convert cryptocurrencies to fiat.
Launch of PYUSD Stablecoin
PayPal announced the launch of its stablecoin PYUSD (PayPal USD) in August 2023. It is fully backed by U.S. dollar deposits, short-term U.S. treasuries, and other cash equivalents, which will help to ensure its stability and give peace of mind to those using it.
PYUSD has been issued by the Paxos Trust Company, which is a regulated entity and is overseen by the New York State Department of Financial Services. As such, Paxos will be publishing monthly reports that will provide details about the assets backing PYUSD. Furthermore, a third-party attestation of the value of PYUSD reserve assets will also be available for the public to view. This will provide transparency and will help to generate confidence in PYUSD over the longer term.
Why Is PayPal Launching PYUSD?
It has become clear over the last few years that PayPal has shown genuine interest in the cryptocurrency industry. So far, the company has only dipped its toes into the water by providing cryptocurrency conversions and so on. However, the launch of PYUSD is an indication that PayPal is ready to fully embrace the world of cryptocurrencies.
Information released by the company suggests that PYUSD is being launched to bridge the gap between traditional fiat currencies and digital environments, such as Web3. This will be achievable because PYUSD will be able to offer a stable asset that is connected to the digital cryptocurrency world and also a traditional fiat currency, the U.S. dollar.
What Will PYUSD Be Used For?
PYUSD will be used for several things. Primarily, it is focused on delivering smooth and efficient payment transactions in the ever-evolving digital world. For example, users will be able to use PYUSD to send remittances in the form of bills, invoices, gifts, and so on, alongside international payments and more.
PYUSD can also be transferred between PayPal and third-party external wallets, be sent as person-to-person payments, be used to buy products and services at merchant checkouts, as well as converted to and from supported cryptocurrencies. It is still unclear as to whether casino sites collaborating with PayPal and so on will start accepting PYUSD, but announcements on these partnerships are expected in the coming months.
It’s worth noting here that PYUSD is an ERC-20 token that will be on the Ethereum blockchain, which means that it will be available and supported by a massive number of wallets and Web3 applications.
What Have Industry Experts Said About PayPal and PYUSD?
There have been a variety of viewpoints offered about PayPal’s launch of PYUSD by those within the industry. On the more positive side, the CTO of Tether, Paolo Ardion, has “welcomed” PayPal’s move into the stablecoin industry and suggested that all players within the space are working towards the goal of driving adoption and innovation.
Similarly, Shipyard Software CEO, Mark Lurie, noted that if PayPal can prove stablecoins to have a valuable use-case, other financial institutions are also likely to adopt them. In part, this viewpoint seems to be driven by the fact that PayPal is already a trusted household name, which means it has an opportunity to drive change.
On the flip side, Keyrock CEO Kevin de Patoul did have some words of caution for PayPal. He believes there is significant risk with this type of move due to the regulatory climate within the industry.
What Is the Future of PYUSD?
A lot of what happens with PYUSD in the future will depend on how well it is implemented. Perhaps one of the most important aspects of its success is that it manages to maintain stability and, therefore, develop trust over the longer term. This would encourage other platforms to implement features containing the use of PYUSD, which may lead to mainstream adoption in the future. For now, it will be interesting to see how hard PayPal markets its new stablecoin.