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Earlier this month, payment platform giant PayPal announced the release of PayPal USD (PYUSD) - a stablecoin fully backed by US Dollar deposits, short-term US treasuries and similar cash equivalents.

Unsurprisingly, this new revelation quickly took the crypto world by storm. Described by Forbes as a potential , PYUSD is designed to drive payment efficiency and improve customer experience. It also aims to

But with all this hype inevitably comes scepticism - from concerns over user protection to being labelled a “marketing gimmick”. As the crypto community is no stranger to breakthrough innovations and hyped launches, many approached this announcement with curiosity and caution.

So with both sides of the coin, let’s look into the multifaceted world of PayPal’s PYUSD, including its potential, challenges and implications it might hold for the future of digital transactions.

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What can you do with PYUSD?

PYUSD is available to consumers, merchants and developers. By purchasing the PYUSD stablecoin you can:

• Transfer PYUSD between your PayPal and any compatible external wallets
• Make peer-to-peer payments 
• Use it to pay for purchases by selecting it at checkout
• Convert any of PayPal’s supported cryptocurrencies to PYUSD, and vice versa

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What potential does it have? 

The introduction of PYUSD gives us a small glimmer of hope in the troubled cryptocurrency industry, which has faced many challenges over the past year. 

Additionally, while stablecoins are protected from volatility, they are yet to be fully adopted into the mainstream payment system. For example, in 2019, Meta’s attempt to launch its own Libra stablecoin was met with backlash after regulators raised concerns over global financial stability.

Patrick McHenry, Representative for the US House Financial Services Committee, commented that PYUSD is an indication that stablecoins “hold promise as a pillar of our 21st-century payments system”.

“We are currently at a crossroads to keep America at the forefront of digital asset innovation. Congress is making significant, bipartisan progress on legislation to ensure the U.S. leads the financial system of the future,” he stated.

Meanwhile, Mat Peck, CTO at Monavate, said this announcement shouldn’t be underestimated. He also commented that PayPal’s decision to run PYUSD on ERC-20 while fully backed by USD deposits to a global payments ecosystem creates an opportunity to showcase the benefits of stablecoins, without the typical risks and complexities.

“Their decision to publish details of the reserve every month will ensure confidence remains high that one PYUSD can always be exchanged for one USD, so the need for that redemption will be reduced, and the benefits of almost instant, global settlement of payments for goods and services can be realised.

“Couple that with the ability to spend USD stablecoin through the PayPal network in the same manner as fiat currency, including in real-world transactions through points of sale, then the significance of this announcement should not be underestimated. This could well be the first, global, stable product adopted by the wider public without fear of underlying technology.”

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But on the flip side: Is it all just talk?

While PYUSD has mostly been met with positivity and enthusiasm, some have expressed their disapproval of the new stablecoin.
Jorge Lesmes, senior banking director at IT firm NTT DATA, shared his concerns over user protection. As PYUSD is issued by the Paxos blockchain, users’ finances are not protected in the same way as with a traditional bank.

“From my perspective, PayPal’s move is certainly significant and will likely spur an influx of other technology companies to take a similar route into the payments market, but I do not believe that the widespread adoption of stablecoins is the best way to harness blockchain technology for the benefit of consumers,” Lesmes stated.

“We have seen that stablecoins can be liable to the same risks as unpegged cryptocurrencies in the past – Luna/UST comes to mind – and I would argue central bank digital currencies (CBDCs) are a more sensible and risk-averse way forward,” he added.

Meanwhile, PYUSD has also been described as a “marketing gimmick” by an , claiming that this new release is “more about branding than blockchain”. The article also commented that PYUSD is vulnerable to bank runs, such as when the USDC stablecoin fell below its $1 peg after mass selling when users learned that its parent company held $3.3 billion in the troubled Silicon Bank.

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The Bottom Line

Overall, the release of PYUSD is indicative of the broader shift toward mainstream acceptance of stablecoins and cryptocurrencies. Its success, however, will depend on striking the right balance between technological innovation, regulatory compliance, and user trust. 

As the world continues its journey into a more decentralised financial future, the trajectory of PYUSD could offer invaluable insights into shaping a more inclusive and secure digital economy.

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Looking to enter the world of Web3? Look no further

Want to offer stablecoins to your customers? Say hello to our Cryptodraft & Stableloan features.

By opening a Cryptodraft or Stableloan, users can open an instant line of credit to spend by using their crypto as collateral. Available in USDC, USDT and EURT, these features empower your customers with the flexibility to access funds, without selling their crypto assets.

Here’s a quick rundown of what they can offer.

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Cryptodraft

• Quick and easy approval
• 10% LTV with 0% monthly interest
• Borrow up to 60% of collateral value
• Can be paid back partially or in full

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Stableloans

• Fast approval process
• Borrow at a fixed period of 6, 12, 18 and 24 months
• Borrow up to 50% of collateral value
• Any agreed interest can be paid off separately

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Want to find out more? Click the link below to get in touch today!

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Get in touch!

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