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HomeGeneralPayPal's Entry Into the Stablecoin Market Stirs Up The Entire Crypto Market

PayPal’s Entry Into the Stablecoin Market Stirs Up The Entire Crypto Market

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PayPal is reportedly rolling out a stablecoin called PYUSD, marking the first stablecoin introduced by a major financial company. PYUSD is designed to be redeemable for US dollars at any time and can be exchanged for other cryptocurrencies on PayPal’s network. Issued by Paxos Trust Co., PYUSD is fully backed by US dollar deposits, short-term Treasuries, and similar cash equivalents, offering stability in value. The stablecoin will gradually become available to PayPal customers in the United States.

PayPal CEO Dan Schulman aims to reinforce the company’s digital payment dominance with the introduction of PYUSD, leveraging technology for instant, cost-effective transfers without intermediaries. Despite a 33% decline in PayPal shares over the past year due to a slowdown in online payments growth post-pandemic, Schulman envisions PYUSD becoming a vital part of the overall payments infrastructure. Stablecoins like PYUSD pegged to assets such as the dollar, have existed for nearly a decade, with limited adoption in consumer payments, totaling approximately $126 billion in circulation, with Tether’s USDT being the largest.

Read More: How Much Money Can You Send Through PayPal.

PayPal faced regulatory setbacks with its PYUSD stablecoin, pausing work in February amid heightened scrutiny. However, the company believes the regulatory environment is becoming clearer and notes a growing demand for alternative stablecoins due to market concentration. The House Financial Services Committee recently advanced a bill for regulating crypto stablecoins, with Representative Patrick McHenry highlighting the potential of stablecoins like PYUSD under a transparent regulatory framework, emphasizing the need for clear regulations and robust consumer protections in this space.

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PYUSD Faces Criticism

The introduction of PayPal’s PYUSD stablecoin faced criticism from legislators, including Rep. Maxine Waters and Sen. Sherrod Brown. Waters expressed significant security concerns and suggested PayPal should have waited for federal regulatory approval before launching. Brown emphasized the risk to consumers’ money, drawing parallels to the volatility seen with other so-called stablecoins, particularly citing the Terra (Luna) incident in the summer of 2022.

PayPal’s Crypto Expansion

PYUSD, PayPal’s new stablecoin, is redeemable for dollars, exchangeable for other cryptocurrencies within PayPal’s network, and will soon be integrated into the Venmo payments app. Users can transfer their token holdings between PayPal and Venmo wallets and even move the stablecoin to compatible third-party wallets outside the PayPal network. This move expands PayPal’s cryptocurrency services, initially launched in 2020, allowing its 431 million global users to buy, sell, and make payments in various tokens like Bitcoin. Despite recent challenges, including financial reserves set aside for loans, PayPal shares experienced a 1.6% increase in early trading on Monday.

TerraUSD Implosion

PayPal expects PYUSD’s initial use in cryptocurrency and web3 sectors before expanding to remittances and micro-payments. Stablecoins, touted for cheap and instant transfers, face scrutiny, with the implosion of TerraUSD raising doubts about their functionality. To address regulatory concerns, PYUSD will be regulated in New York, with monthly reports on its backing assets and third-party attestations starting in September, following extensive discussions with US regulators and policymakers.

FAQs

  1. Is PayPal launching a stablecoin?

PayPal has taken a groundbreaking step by launching a U.S. dollar-backed stablecoin, becoming the first major U.S. financial institution to do so. This stablecoin is introduced as part of PayPal’s expanding suite of cryptocurrency services, aiming to facilitate payments. The move underscores PayPal’s commitment to advancing its presence in the evolving landscape of digital currencies and payments.

  1. What is the PayPal stablecoin exchange?
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PayPal USD (PYUSD) is a stablecoin fully backed by US dollar deposits, US treasuries, and similar cash equivalents, ensuring a stable value. On the PayPal platform, 1 PYUSD is equivalent to 1 USD, emphasizing its pegged nature. Stablecoins like PYUSD are designed to provide a cryptocurrency with a steady value over time, often linked to a reference asset such as the U.S. dollar.

  1. What is a fiat-backed stablecoin?

Fiat-backed stablecoins, exemplified by Tether (USDT), USD Coin (USDC), and others, are cryptocurrencies tied to the value of real-world currencies like the U.S. dollar or euro. The stability of these stablecoins is ensured by maintaining reserves in the respective fiat currency equivalent to the circulating supply. This design aims to provide users with a digital asset that mirrors the value of traditional currencies while minimizing the volatility commonly associated with other cryptocurrencies.

Bellie Brown
Bellie Brownhttps://businesstimes.org
Hi my lovely readers, I am Bellie brown editor and writer of Businesstimes.org. I write blogs on various niches such as business, technology, lifestyle., health, entertainment, etc as well as manage the daily reports of the website. I am very addicted to my work which makes me keen on reading and writing on the very latest and trending topics. One can check my more writings by visiting Cleartips.net

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