PayPal stablecoin: fueling crypto adoption or falling flat?

After enabling payments in four cryptocurrencies two years ago, PayPal has taken another leap in its crypto commitment, issuing its own stablecoin.

What does it mean for the crypto space: yet another centralized stablecoin or a boost to crypto adoption? Let’s see.

📢 This week, the payments giant announced its very own dollar-pegged stablecoin $PYUSD. Users will be able to convert it to/from the cryptos available on the platform, transfer to PayPal, Venmo, and later – exterior accounts, as well as use it for purchases.

🔍 What is $PYUSD ?

$PYUSD is an Ethereum-based token issued by Paxos (the company that previously minted $BUSD for Binance) and is backed by “US dollar deposits, US treasuries, and similar cash equivalents”, as per the company’s statement.
PayPal committed to issuing monthly public third-party attestations on the state of its reserves.

As with other centralized stablecoins, $PYUSD’s smart contracts allow freezing and seizure to comply with legal directives.

💼  What does this mean for the stablecoin market?

The current stablecoin market tends heavily to oligopoly. Tether dominates the market to the tune of 66% 🤯, followed by Circle’s 21%.
$PYUSD’s entry will add so much-needed diversity, boosting competition (always a good thing) and offering users choices.

🔗 What does this mean for the crypto space?

PayPal’s massive user base of 430M accounts could contribute, at least partially, to spreading crypto adoption and making interactions with web3 easier. However, for this, the company must first unlock the use of third-party wallets, as it promised.
It will also contribute to Ethereum’s transactions, generating fees for validators.

⚖️ Also, the arrival of such a serious company into the stablecoin business could prompt the US politicians to take a better look at the space and create a specific legal framework, so far absent.

All in all, this looks like a good thing. Even better if PayPal will learn from its competitors’ mistakes and take the reserves issue very seriously, all while striking the right balance between compliance and web3 values.