PayPal Crypto: What is PayPal USD (PYUSD)
PayPal’s stablecoin, named PayPal USD (PYUSD), marks a significant milestone in the evolution of the crypto sector by the electronic payment titan.
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PayPal Holdings, Inc., headquartered in San Jose, California, is a multinational fintech powerhouse that facilitates online transactions in most countries globally, boasting over 430 million active accounts and an extensive infrastructure.
Founded in 1998 as Confinity by three immigrants: Ukrainian-born programmer Max Levchin, German billionaire Peter Thiel (known as Facebook's inaugural external investor), and Polish entrepreneur Luke Nosek, the company initially focused on enhancing handheld device security.
The digital wallet initiative, PayPal, was introduced a year after the company's formation. In 2000, the project merged with Elon Musk's x.com and made its IPO in 2002. By 2022, PayPal secured the 143rd spot on the Fortune 500 list of the largest US corporations. However, its stock has faced significant challenges, plunging by 33% over the last 12 months, mainly attributed to a decrease in online payments due to the recent COVID-19 pandemic.
It's worth noting that PayPal USD isn't the company's first venture into the crypto arena. They first entered the crypto market in 2020, acting as intermediaries. PayPal's crypto strategy encompasses several key aspects:
- Streamlined Transactions: Simplifying the process of purchasing cryptocurrencies with an accessible app and a minimal threshold amount (as low as $1).
- Emphasis on Security: PayPal prioritizes the digital assets' security of its users, offering compensation up to $50,000 for unauthorized transactions.
- Unified Crypto Management: The company enables users to consolidate all their crypto assets into a singular PayPal Balance account.
PayPal (PYUSD): The Objective Behind Issuing the Stablecoin
As per CoinGecko's data, there are currently stablecoins valued at $126 billion in circulation. The leading entity in this segment of the cryptocurrency market is USDT, managed by Tether Holdings Ltd. The information about PayPal Holdings Inc. planning to release its own stablecoin had been circulating for nearly half a year. In February, news leaked suggesting a halt in the project's launch after PayPal's primary collaborator, the blockchain company Paxos Trust Co., became the subject of an investigation by the New York State Department of Financial Services. This scrutiny was due to the registration of the Binance USD (BUSD) coin, a Paxos product. The Securities and Exchange Commission stated their view that BUSD functions as an investment contract with potential profit-making capabilities. This suggests that such a stablecoin might possess securities' characteristics and should thus fall under the Commission's jurisdiction.
This recent alignment of interests between PayPal and Paxos highlights the intricate relationship between fintech and regulatory governance. The launch of PYUSD in August seems to indicate the crypto sector's ongoing adjustment to evolving regulatory norms.
It's worth noting that just before PYUSD's introduction, the House Financial Services Committee approved the bipartisan Stablecoin Payment Clarity Act.
Stablecoins—if issued under a clear regulatory framework—hold promise as a pillar of our 21st century payments system. Clear regulations and robust consumer protections are essential to enabling stablecoins to achieve their full potential. That’s why it’s more important than ever that Congress enact legislation to provide comprehensive digital asset regulation, especially for stablecoins,
said the Chairman of the House Financial Services Committee, Patrick McHenry.
PYUSD: Tokenomics and Listing
Based on PayPal's information, PYUSD is fully backed by a mix of US dollar deposits, short-term US Treasury bonds, and similar cash equivalents. The dependability of PayPal's USD is highlighted by its redemption feature: PYUSD can easily be converted to US dollars at a 1:1 rate. This conversion process is facilitated by the trust company, Paxos. During its first week of existence, a total of 26.9 million PYUSD was issued.
The introduction of PayPal USD offers several benefits to US clients:
- Simple Transfers: Users can shift PYUSD between their PayPal accounts and compatible external wallets, ensuring functional interoperability and flexibility.
- P2P Payments: PYUSD enables peer-to-peer payments, providing swift and hassle-free transactions.
- Easy Checkouts: Clients can settle their purchases using PayPal USD.
- Crypto Conversions: PayPal users can use PYUSD to convert into the cryptocurrencies supported by the platform and vice-versa.
Huobi was the pioneer cryptocurrency exchange to officially declare an upcoming listing of PayPal USD. Once the stablecoin achieves ample liquidity, trading will begin with the PYUSD/USDT pair (with a transaction fee of 0%). Additionally, BitMart has also proclaimed an initial PYUSD listing, with a focus on the PYUSD/USDT pair.
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