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Payments giant PayPal, which was founded by Elon Musk, Peter Thiel, Yu Pan, and others, announced the launch of a U.S. dollar-pegged stablecoin, PayPal USD (PYUSD). While stablecoins – crypto tokens whose monetary value is pegged to a stable asset to protect from wild volatility – have been around for years now, they are yet to successfully make headway into the mainstream consumer payments ecosystem, mainly serving as a means to trade other cryptocurrencies such as Bitcoin and Ethereum. Tether remains the largest stablecoin, followed by USD Coin, issued by crypto provider Circle.
Issued by Paxos Trust Co., the dollar-pegged stablecoin is expected to become "a part of the overall payments infrastructure," PayPal CEO Dan Schulman told Bloomberg.
PayPal USD is designed to contribute to the opportunity stablecoins offer for payments and is 100% backed by U.S. dollar deposits, short-term U.S. Treasuries, and similar cash equivalents. PayPal USD is redeemable 1:1 for U.S. dollars and is issued by Paxos Trust Company. An advantage of this stablecoin is that it can be redeemed for U.S. dollars at any time and can also be used to facilitate the buying and selling of other cryptocurrencies offered on PayPal's platform, including Bitcoin.
As an ERC-20 token issued on the Ethereum blockchain, PayPal USD will be available to an already large and growing community of external developers, wallets, and web3 applications, can be quickly adopted by exchanges, and will be deployed to power experiences within the PayPal ecosystem.
"The shift toward digital currencies requires a stable instrument that is digitally native and easily connected to fiat currency like the U.S. dollar," said Dan Schulman, president and CEO of PayPal. "Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD."
PayPal's announcement, which lifted its shares 2.5% in afternoon trading, reflects a show of confidence in the troubled industry that has, over the last 12 months, grappled with regulatory headwinds exacerbated by a string of high-profile collapses.
Denis Sklyarov, Co-Founder and CEO of WiFi Map, a crypto-centric DeWi app, said, "The launch of stablecoin by PayPal is aimed at bridging the gap between Web3 and fiat for users, merchants, and developers. Nasdaq-listed Paypal has become the first major player to launch its stablecoin, which can be used for retail purchases, P2P transfer, and wallet-to-wallet transfer. Since PayPal USD is 100% backed by US dollar deposits, it will automatically generate trust among the users and merchants, enabling rapid mass adoption of PYUSD."
The launch of PYUSD will revolutionize the global payment system and leverage the emerging potential of stablecoins to address the loopholes in the global financial system. The compliant stablecoin will change how people send money to their friends and families, send remittances, and make international payments a hassle-free experience. The move signals a paradigm shift in the mindset of big companies toward cryptocurrencies. It creates an environment of trust and transparency by leveraging the combined strength of Fintech and crypto.
"The move will make the financial system more liberal and less dependent on centralized banks. It is important to note that maintaining customer trust will require PayPal to publish regular proof of reserve reports and provide impeccable security for user funds. It will be interesting to see if PYUSD will be compatible with self-custody wallets if users want complete control of their keys and coins. The compatibility with a wider range of wallets and custody platforms will enable faster adoption of PYUSD," he added.
The emerging market for privately issued stablecoins had a heavy setback last year when one called TerraUSD imploded in May, causing a collapse in cryptocurrency prices and the failure of several digital asset companies.
Shivam Thakral, CEO of BuyUcoin, India's second-longest-running digital asset exchange, said, "By launching a new stablecoin tied to the US dollar, PayPal has made considerable advancement in the world of cryptocurrencies. This action comes after more than a year of rumors and speculation since PayPal first acknowledged the growth of the dollar-backed stablecoin program. The Ethereum-based stablecoin aims to provide consumers with a reliable and secure digital payment method.
PayPal's entry into the stablecoin market highlights cryptocurrencies' growing acceptance and usage within conventional financial institutions and may pave the way for additional market innovation. We can expect more fintech giants to make their foray into the digital asset market by leveraging the combined strength of digital and traditional finance."
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