The cryptocurrency industry has been steadily expanding its reach and influence in the global economy, and Paypal (NASDAQ: PYPL), a leading financial technology company in the US, has been at the forefront of this trend. Since 2020, Paypal has enabled its users to transact with digital assets, and now it is taking a bold step to launch its own cryptocurrency. This move could have significant implications for the adoption and innovation of the emerging technology.
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PayPal USD (PYUSD) is the name of the new ERC-20 stablecoin launched by PayPal in partnership with Paxos Trust Company, a regulated crypto firm. The stablecoin is pegged to the United States dollar and runs on the Ethereum (ETH) blockchain, ensuring fast and secure transactions. The stablecoin is fully backed by USD deposits, short-term Treasuries, and similar cash equivalents, as stated in the official press release on August 7. PayPal USD aims to provide a convenient and cost-effective way for PayPal users to access the benefits of the crypto ecosystem and the decentralized finance (DeFi) space.
What this means
The latest innovation in the PYUSD project will provide users with the option to convert their PYUSD tokens into dollars and other digital assets on PayPal’s platform, as well as use them for payments. This functionality will soon be extended to Venmo, PayPal’s popular social payments app, allowing users to transfer their token balances between PayPal and Venmo wallets. The project is also working on enabling PYUSD interoperability with third-party wallets outside of PayPal’s network.
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As PayPal’s CEO Dan Schulman, who will soon leave his position, announced, the stablecoin will be gradually accessible to customers in the US, and the company’s ultimate ambition is to dominate the digital payments market using direct, swift, and cost-effective transfer technology.
Crypto and PayPal
PayPal’s stablecoin project was initiated after the company obtained a ‘BitLicense’ from the Department of Financial Services, which allows it to operate with digital assets. However, the project faced regulatory challenges in February, when Paxos, the issuer of Binance USD (BUSD), came under scrutiny from the US Securities and Exchange Commission (SEC) for allegedly conducting illegal sales of BUSD, which the SEC regards as a security.
The stablecoin market is dominated by a few players, such as Tether and USD Coin, which account for most of the trading volume and liquidity in the crypto space. However, PayPal, one of the leading payment platforms in the world, is looking to challenge this status quo by launching its own stablecoin in the near future. According to Jose Fernandez da Ponte, the head of PayPal’s blockchain and digital currencies team, the company sees a growing demand for a more diversified and competitive stablecoin market, as well as a more favorable regulatory environment that provides more clarity for the industry. He added: “Our goal is to create a stablecoin that meets the highest standards of compliance and security, and that offers our customers a variety of use cases and benefits. We are also closely following the regulatory developments and engaging with the relevant authorities to ensure that we operate in a responsible and transparent manner.”
PayPal has been enabling crypto payments since 2018, offering its customers the option to buy, sell, and store Bitcoin (BTC) and other digital currencies using its online wallets, as well as to make purchases with crypto, according to CryptoCaster’s report on October 21, 2020.
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