The ambition behind Paypal's stablecoin: 400 million potential crypto users, holding $600 million in cryptocurrencies
On August 7, US payment giant Paypal announced the launch of a US dollar stablecoin for transfers and payments, etc., causing quite a stir in the crypto bear market.
Industry sources said that this is a landmark event. By issuing US dollar stablecoins, Paypal may expand the crypto industry to hundreds of millions of users.
It may expand to hundreds of millions of crypto users
On August 7, PayPal announced the launch of PyUSD stablecoin.
On official social media, Paypal stated: “We have launched a new stablecoin, PayPal USD (PYUSD). It is designed for payments and is backed by highly liquid and secure assets. Over the next few weeks, you'll be able to buy, sell, hold, and transfer PYUSD.”
Paypal, founded in 1998, is a traditional online payment service provider headquartered in the US, with a share of over 77% of the North American payment market. According to the official website, it has 435 million active consumers and merchants worldwide.
PayPal President and CEO Dan Schulman stated in the announcement that he hopes to further consolidate PayPal's dominant position in the digital payments field through PYUSD by relying on technology that can achieve instant and low-cost transfers without a central intermediary. The vision is to become part of the overall payment infrastructure.
According to reports, PyUSD is issued by Paxos Trust Co., supported by US dollar deposits, short-term treasury bonds, and similar cash equivalents. It is linked to the US dollar, and will gradually be opened to PayPal customers in the US. PYUSD inEthereumOnce issued, it can be transferred to a compatible third-party wallet outside of the PayPal network.
The launch of PyUSD has caused quite a stir in the sluggish PayPal stock price and the crypto market.
On August 7, PayPal's stock price reversed its decline and rose 2.66%. In the previous week, its stock price continued to fall by 18%.BitcoinThere was also a rebound with Ethereum, and as of press time, both had risen by more than 1%.
Industry analysts said that Paypal has opened up a convenient channel for ordinary users, and users were previously only able to go throughTether、BinanceWhen Huobi Cryptocurrency purchases payment stablecoins, it can now be done through the Paypal platform. Paypal may bring tens of millions or even hundreds of millions of users into the crypto field. Also, Paypal's compliance will greatly expand the crypto industry.
Walter Hessert, head of strategy at Paxos, said that the launch of PYUSD is a “watershed moment” for the crypto industry, and the difference from other competitors is that Paxos is a trust company regulated by the New York Department of Financial Services (NYDFS). If Paxos goes bankrupt, the regulator NYDFS will step in and users' funds are safe.
Fang Hongjin, co-chairman of the Hong Kong Blockchain Association, said that this is a landmark event. Although Paypal has fewer users than WeChat and Alipay, it is a mobile payment platform with a higher degree of internationalization. Based on a large number of fully trusted users, Paypal has connected traditional financial users and crypto finance users.
However, Fang Hongjin is not very optimistic about the recent promotion and application of PYUSD. “Paypal is mostly used for personal cross-border payments, and adding US dollar stablecoins to its applications may violate regulatory requirements in some countries and regions and cannot be used in these countries and regions.”
Minimalist Money partner and chief technical expert Meng Dinglin told Techub News that compared to outside the crypto industry, the incident mainly had a great impact on the crypto community, giving the industry more confidence. Since there is still a lack of clear policy support and application scenarios are very limited, ordinary users outside the crypto community still need a period of adaptation.
“Cryptocurrency has a high threshold for use, and payment companies are an important part of the crypto ecosystem. This event may have a good publicity and popularization effect for ordinary users.” Meng Dinglin said.
Holds $600 million in cryptocurrencies for clients
Paypal's launch of the US dollar stablecoin was unexpected. As early as 2021, there were media reports that Paypal was developing a US dollar stablecoin.
However, the process did not go smoothly. Paypal's stablecoin partner issuer Paxos was investigated by the New York Financial Services Department (NYDFS), and in February of this year, Paypal announced the suspension of its stablecoin product plans.
Industry analysts said that Paypal's recent launch of stablecoins may be related to the loosening of regulations.
In recent months, strong global regulation of the crypto industry has begun to loosen. For example, Hong Kong, China announced that it will embrace Web 3.0 and vigorously promote the development of the Web 3.0 ecosystem. The USSECOfficially receivedBlackRockIn the spot Bitcoin ETF application submitted by (one of the largest asset management groups in the world), the US court ruled that XRP is not a security.
As a giant in the traditional payment sector, Paypal has been focusing on the crypto industry for a long time and has a continuous layout around online payments.
According to media reports, as early as 2016, PayPal andCoinbaseA long-term partnership has been established. In 2018, Coinbase allowed US customers to make instant withdrawals via PayPal. Since then, Coinbase users in Europe, Canada, etc. can withdraw money from their PayPal accounts.
In June 2019, Facebook published a white paper on the Libra Program, and Paypal also participated, but announced its withdrawal in October of that year.
According to the white paper, Libra is also positioned as a stablecoin, linked to a basket of sovereign currencies.
In October 2020, PayPal issued a statement saying that it has obtained a restricted cryptocurrency license issued by the New York Financial Services Department and will cooperate with Paxos to enter the cryptocurrency market, allowing customers to buy, hold, and sell cryptocurrencies through their PayPal online wallets. Since then, Paypal has successively launched Bitcoin, Ethereum,LitecoinCryptocurrency services such as Bitcoin Cash.
Additionally, Paypal is expanding its crypto footprint through acquisitions or investments.
In 2019, PayPal invested in TRM Labs, a company focused on preventing cryptocurrency fraud and financial crime, and Cambridge Blockchain, a blockchain identity management and compliance software company.
In 2021, Paypal bought cryptographic security company Curv for nearly $200 million.
However, Paypal's involvement in the crypto industry has also been questioned. Some industry sources said that purchases on Paypal are not real bitcoins; they cannot be transferred to other wallets; they are just Bitcoin price exposure adjusted by the custodian, and users are unable to review Paypal's actual reserves.
As of the end of 2022, PayPal held $604 million worth of Bitcoin, Ethereum, Litecoin, and Bitcoin Cash for its customers, according to a report submitted by PayPal to the US Securities and Exchange Commission (SEC).
Fang Hongjin said that Paypal is a highly real-name payment system. Due to the existing habits of crypto users, the US dollar stablecoin added by Paypal is not particularly attractive to crypto users; more, it attracts people outside the crypto community to participate. Although Paypal's issuance of US dollar stablecoins has had a great impact on industry opinion, it will not cause much competition to crypto companies such as USDC and USDT in the short term.
Original article by Carl
