PayPal’s announcement of entry into the stablecoin segment reignites excitement to levels mirroring the BlackRock application for Bitcoin exchange-traded fund (ETF). Such is evident with the unveiling of PYUSD stablecoin triggering active debate across the industry.
PayPal Inc announced entry into the stablecoin space with the unveiling of PayPal USD (PYUSD) on Monday, August 7. The move attracted mixed reactions within the crypto community. Some members lauded the move as an industry-shaping moment, while others labeled it tepid.
PayPal Entry into Stablecoin Segment Mirrors BlackRock Application for Bitcoin ETF
The decision by PayPal to enter the $125billion stablecoin segment is rightfully yielding shockwaves for an established payment platform in the traditional financial sphere expanding its scope into the digital space. Also, the move identifies Paxos Trust as the authorized issuer of the PYUSD token. As such, the expanded scope features an incumbent force within traditional finance leveraging scaled crypto technology.
The move by PayPal into the stablecoin segment will likely rival BlackRock’s much-sought spot Bitcoin ETF. 3iQ analyst Mark Connors indicated that the 431 million users give PayPal a significant head start. The researcher indicated that PayPal’s influence replicates the impact that pro-bitcoin remarks by BlackRock chief executive Lary Fink attain as the leading asset manager.
Connors considers that PayPal’s entry into stablecoin would have an immediate impact than when Larry Fink validates Bitcoin. The initiative by PayPal portrays devotion for the traditional payment giant to participate in the next evolutionary finance actively.
Hashflow chief executive Varun Kumar predicts that PayPal stablecoin would expand the crypto usage beyond speculation. He indicated that introducing the PYUSD stablecoin would attract leading entities to embrace the digital assets space.
Kumar observed that PayPal introducing stablecoin yields a net positive effect for the digital assets ecosystem as a gateway towards mass adoption. He confessed that it would be unsurprising if more major entities embraced a similar path.
Stablecoins utilize a unique design where the tokens’ value is pegged to real-world assets, including the US dollar. As such, their design portrays a steady price.
The tokens have emerged as crucial instruments within the digital market and account for a significant portion of trading activity in the ecosystem. A review of the last 24 hours of activity tracked by CoinGecko shows over $3 billion worth of Bitcoin traded against stablecoins relative to $400 million in US dollars.
PayPay announced it would restrict the initial PYUSD stablecoin rollout to US-based customers. It plans to expand usage into the Venmo payments application.
Eventually, PayPal will allow users to hold the PYUSD balances within third-party digital wallets, including MetaMask. A review of PayPal’s website shows that customers purchasing PYUSD will send the balances to the Ethereum wallet addresses though incurring network fees.
dYdX chief executive Antonio Juliano considers that providing additional stablecoin alternatives by trusted companies is a remarkable achievement. He considers that while Tether USDT and Circle USDC (USDC) dominate the stablecoin segment, the emergence of competitive options would yield better products.
PayPal’s PYUSD Set to Trigger Fierce Competition in Stablecoin Segment
Juliano admitted that fierce competition would increase the options for reputable stablecoins, hence nurturing the industry. The dYdX executive indicated that though a big supporter of USDC, additional stablecoin options are a great accomplishment for consumers.
Circle’s USDC commands a $26 billion market capitalization. It ranks second to Tether’s USDT, which realizes an $83 billion market capitalization.
PayPal’s establishing stablecoin would certainly fill the void following the $40 billion Terra’s UST collapse. Unlike Tether’s USDT use of US treasury support, the UST involved an algorithmic stablecoin relying upon trading incentives to keep the price steady.
The crypto crisis witnessed in 2022 plunged lawmakers into action. The contagious nature of the crisis prompted Congressional action to legislate the elusive framework for digital assets.
The journey to comprehensive legislation is ongoing, led by Patrick McHenry, who chairs the House Financial Services Committee. Congress admitted that the US is at a crossroads to sustain its forefront position in digital asset innovation.
Crypto analyst Adam Cochran illustrates that PayPal’s move is missing since PYUSD would be confined within PayPal’s ecosystem and later restricted to Venmo. The restricted scope would leave PYUSD as a mostly centralized rail.
PayPal’s PYUSD Similarity to CBDC
Hodder Law Firm managing partner Sassha Hodder expressed concerns about PYUSD. He indicated that the capability of PayPal to reverse transactions makes the PYSUD stablecoin comparable to the central bank digital currency (CBDC).
Hodder indicated that PYUSD portrays censorship capabilities evident in CBDC. Although issued by a private company, PayPal has a significant magnitude as a government.
PYUSD is designed similarly to other stablecoins and CBDCs by pegging its value to a sovereign currency. It runs on public networks, though, allowing the centralized stablecoin issuers to freeze accounts and void balances as instructed by government entities.
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