PayPal recently launched its stablecoin called pyusd, which is seen as a major development for the traditional financial industry to enter the crypto space. This move is considered more important than BlackRock’s application for a spot Bitcoin ETF. In this article, we’ll explore what PayPal’s stablecoin is, how it was created, and the impact it may have on the industry. We will also discuss why some people accept this coin while others have concerns.
PayPal is a major player in the payments industry, with 435 million accounts, making it the world's third-largest payment company after Visa and American Express. It operates in more than 200 countries and territories, an impressive feat considering there are only 193 United Nations member states. Interestingly, when PayPal was founded in 1999, it was considered one of the worst ideas of the year. However, the company’s foray into cryptocurrencies began a few years ago.
In 2019, PayPal briefly joined a consortium backing Facebook's ill-fated stablecoin project, Libra. The following year, PayPal began allowing customers to purchase Bitcoin (BTC) and Ethereum (ETH). In 2022, the company took another step by enabling users to transfer their crypto assets to third-party wallets. However, the launch of pyusd takes PayPal’s involvement in the crypto space to the next level.
Pyusd is the first stablecoin launched by a mainstream financial company. It is pegged to the U.S. dollar and issued by Paxos, a regulated blockchain infrastructure company known for issuing other stablecoins such as the Pax dollar (PUSD) and Binance-branded stablecoin (BUSD). Currently, pyusd is only available to US customers, which limits its use for remittances and international payments, two important use cases for cryptocurrencies. However, this cautious approach may be a strategic move by PayPal to maintain good relations with US regulators.
PayPal may have learned a lesson from Facebook’s Libra failure a few years ago. Facebook’s stablecoin project has faced a number of challenges and missteps, detailed in a Financial Times article. By proceeding with caution, PayPal aims to avoid similar pitfalls and navigate the regulatory landscape effectively.
Overall, PayPal’s launch of its stablecoin pyusd marks a major step in the traditional financial industry’s adoption of cryptocurrencies. While it is currently limited to U.S. customers, the move demonstrates PayPal's commitment to exploring the potential of digital assets. As the crypto industry continues to evolve, it will be interesting to see how PayPal’s stablecoin and its involvement in the crypto space impact the future of finance.