On August 7th, PayPal, a global leader in payment processing, actively launched its US dollar-pegged payment stablecoin, PayPal USD (PYUSD).
PayPal Holdings Inc. has recently unveiled a cryptocurrency offering as a stablecoin named "PayPal USD." This stablecoin is meticulously supported by deposits denominated in U.S. dollars, along with short-term U.S. treasuries and akin cash instruments and can also be exchanged for other cryptocurrencies available on PayPal’s network.
In the coming weeks, clients of PayPal within the United States will have the opportunity to engage in the acquisition of PayPal USD. This stablecoin can be exchanged through the PayPal platform at a value of $1 per unit and is formally released by Paxos Trust Company, situated in New York.
Paxos will be responsible for publishing a monthly public report that outlines the instruments composing the reserves for PayPal USD. This includes cash, US Treasuries, and other assets.
Paxos will also publish a public third-party attestation of the value of the PayPal USD reserve assets. An independent accounting firm will conduct this attestation.
Stablecoins aim to reduce cryptocurrency volatility, enhancing their utility as currency or a store of value.
In the world of digital finance, stablecoins are unique in that they are pegged to a stable and unchanging asset. This strategic approach aims to provide a viable alternative to the inherent price volatility of existing cryptocurrencies.
In response to recent performance challenges that have positioned PayPal as the sixth-weakest performer on the Nasdaq 100 Index, marked by a significant 33% decline in share value over the past year, the company is taking proactive measures to reinforce its competitive standing. PayPal is strategically advancing its position in virtual payments by leveraging advanced technologies and facilitating cost-effective transactions without a central intermediary.
Dan Schulman, the President and CEO of PayPal, articulated the company's strategic direction aimed at integrating within the broader payments infrastructure. He has elucidated the rationale behind the strategic pivot toward digital currencies, including the establishment of PayPal USD, with the primary objective of mitigating friction within digital transactions. This initiative further encompasses the swift transfer of value and facilitates the continued expansion of digital asset integration by prominent global brands. Ultimately, these endeavors are poised to introduce novel customer experiences, thereby augmenting PayPal's pivotal role within the digital payments landscape.
USDT and TerraUSD have faced issues regarding their reserves and reliance on intricate algorithmic systems, resulting in scrutiny and regulatory discontinuation for stablecoins.
Advocates of stablecoins have persistently contended that these digital currencies offer a more advanced mechanism for facilitating cost-effective and instantaneous money transfers and transactions. However, they have encountered opposition from central banks, which are actively engaged in the development of their own digital currencies. Additionally, concerns regarding the adequacy of reserves have cast a shadow over stablecoins like USDT.
Arguably the most noteworthy setback experienced by the stablecoin sector occurred in May 2022, with the collapse of TerraU$D. This collapse was precipitated by the failure of the intricate algorithmic infrastructure underpinning the stablecoin, subsequently triggering a broader downturn in the realm of cryptocurrencies. The creator of TerraU$D, an individual named Do Kwon hailing from South Korea, now faces allegations of fraud brought forth by U.S. prosecutors. These legal authorities assert that the incident led to an approximate loss of $40 billion for investors.