On the evening of August 7, Beijing time, PayPal, the San Jose, California-based payments company, said it will launch the stablecoin PayPal USD (PYUSD). The stablecoin, issued by Paxos Trust (the former issuer of BUSD), is fully backed by US dollar deposits, short-term treasury bonds, and similar cash equivalents, and will gradually be made available to PayPal’s customers in the US. Although PayPal has been involved in the crypto space for the past few years, the launch of its official stablecoin can still be considered a major event in the evolution of crypto.
As an easy way to enter and exit the crypto world, stablecoins are often seen as an important tool to guide crypto users. Up to now, this task has been mainly undertaken by USDC and USDT, but due to the lack of traditional financial and real-world application scenarios, the main users of these two stablecoins are still internal participants in the crypto industry. On the other hand, stablecoins have been under severe regulatory pressure due to the development and promotion of CBDC in various countries. Previously, FaceBook’s ambitious stablecoin project Libra failed under such pressure.
Therefore, the launch of PayPal Stablecoin will play an important role in the history of cryptocurrency’s entry into traditional finance and the real economy. It will not only mean that 430 million PayPal users will have access to a more stable and convenient crypto portal, but it will also further advance the loosening of crypto policy. More interestingly, for Musk and Twitter (now renamed X), the launch of PayPal’s stablecoin adds a lot of imagination to the “X dream” that he has been hoping to realize.
In PayPal’s announcement, the official wrote: PayPal USD is designed to reduce the friction of inexperienced payments in virtual environments, facilitate the rapid transfer of value to support friends and family, send money or make international payments, enable the direct flow of money to developers and creators, and promote the continued expansion of digital assets by the world’s most recognized brands. Most of the current stablecoins are used in a web3-specific environment – PayPal USD will be compatible with this ecosystem from day one and will soon be available on Venmo. pYUSD will be available in the coming weeks, and eligible U.S. customers who purchase PayPal USD will be able to:
1) Transfer PYUSD between PayPal and compatible external wallets
2) Make person-to-person payments using PYUSD
3) Select PYUSD for purchases at checkout
4) Convert any PayPal-supported cryptocurrency to PYUSD
5) Buy and sell via PayPal at $1 per PayPal USD
As the only stablecoin supported within the PayPal network, PayPal USD leverages PayPal’s decades of experience in large-scale payments and combines the speed, cost and programmability of the blockchain protocol. As an ERC-20 token issued on the ethereum blockchain, PayPal USD will be available to the already large and growing community of external developers, wallets, and Web3 applications, and can be easily adopted by exchanges. As of today, PayPal has more than 431 million active accounts globally, but PayPal shares have fallen more than 35 percent over the past 12 months as the surge in online payments during the outbreak waned.
Also, as PayPal expanded its consumer and merchant services such as working capital loans and money transfers across its many platforms, the company said last week that it would have to set aside more money in the second quarter to pay back non-performing loans to merchants, which led to a 12 percent one-day plunge in its shares. Amid the furor, PayPal President and CEO Dan Schulman recently announced he would resign in the coming months. As a result, PayPal USD is arguably Schulman’s last major endeavor in his PayPal career. Previously, Schulman had always hoped that PayPal could establish a dominant position in the digital payments space by relying on instant, low-cost transfers without intermediaries. In an interview with Bloomberg, he said, “The shift to digital money requires a stable tool that is both digitally native and easy to connect to fiat currencies like the U.S. dollar… Over time, our vision is to become part of the overall payments infrastructure.”
It’s also worth noting that the company helping to issue PayPal USD is the same Paxos Trust that previously partnered with Binance to issue BUSD – a fully licensed limited-purpose trust regulated by the New York State Department of Financial Services. With its help, in June 2022, PayPal received a BitLicense from the NYDFS after receiving a conditional BitLicense.
According to the official announcement, beginning in September 2023, Paxos will publish a public monthly PayPal Dollar Reserve report outlining the instruments that comprise the reserve.Paxos will also publish a public third-party attestation of the value of the PayPal Dollar Reserve assets. The attestation will be issued by an independent third-party accounting firm and will be conducted in accordance with the attestation standards established by the American Institute of Certified Public Accountants (AICPA).
2. what Facebook didn’t do, PayPal did
In June 2019, after years of preparation, Facebook (now Meta) launched an ambitious project: a cryptocurrency called Libra. In Meta’s plans, the project will be backed by an international consortium of companies aiming to provide financial services to underbanked populations and extend its own mission as a social media outlet to connect the wider world to the booming digital currency market.
Facebook’s cryptocurrency will be managed by the Libra Association, which is made up of companies like Visa, Mastercard and PayPal. Each member would have equal voting rights and contribute $10 million to the reserve, and would eventually integrate Libra into its services to bring digital currency to more consumers. But soon, Libra came under intense regulatory pressure.
As soon as October 2019, PayPal announced its withdrawal from Libra. soon after, members such as Visa, Mastercard, eBay, Stripe, and others announced their withdrawal. in May 2020, Facebook renamed its Calibra payments division to Novi.
About six months later, the Libra Consortium changed its name to Diem in an attempt to distance itself from the Libra debacle, and in October, Facebook launched a Novi digital wallet pilot, but without Diem, and David Marcus, who had led the Libra project, left the company shortly after. Libra’s failure was not PayPal’s only setback on the road to digital currency payments.
In May 2022, the historic collapse of TerraUSD led to investor losses of more than $40 billion and directly drew regulators’ attention to cryptocurrencies, especially stablecoins. in February 2023, PayPal announced that it was suspending development on PYUSD. The day before, its partner Paxos was investigated by the New York Department of Financial Services (NYDFS) and instructed to stop issuing BUSD, a stablecoin owned by Binance. The NYDFS said its decision was a result of “several unresolved issues related to Paxos’ oversight of its relationship with CoinSec”.
Musk founded X.com in 1999 with the aim of becoming the world’s online center for financial transactions of all kinds. X.com later merged with Peter Thiel’s Thiel’s Confinity when Musk became the largest shareholder and CEO of the combined company, insisting that the company’s name should be X.com and that PayPal was just one of its subsidiary brands. Peter Thiel’s team objected, and Peter Thiel eventually kicked Musk out of PayPal.
According to Walter Isaacson, author of Musk’s biography, Musk said, “If you just want to be a niche payment system, PayPal is better… But if you want to take over the world’s financial system, then X is a better name.” In 2017, Musk purchased the X.com domain name from PayPal for an undisclosed amount. Musk thanked PayPal on Twitter at the time for allowing him to buy back the X.com domain name, stating, “There are no plans at this time, but it has tremendous sentimental value to me. “Five years later, Musk purchased Twitter for $44 billion, formally merging his newly acquired social media companies into a single, X Corp. a Nevada-incorporated entity.
Musk said in October 2022, “The acquisition of Twitter was the accelerant that created X, the app for everything.” The Twitter CEO said in a live forum, “If you’re in China, you can live your life through WeChat, which does everything, and X is kind of like Twitter, plus PayPal, plus a whole bunch of stuff, and all of that is integrated into one interface and has a great interface. ” As a result, Musk’s original vision for Twitter included an embedding of a financial system. In August 2023, however, Twitter user @cb_doge posted a tweet reminding cryptocurrency players that Elon Musk and X (Twitter) had never issued any cryptocurrencies and to beware of scams. Musk replied under the tweet, “We will never [issue cryptocurrencies].”
However, without an internal payment system Twitter does have growth limitations in a number of ways. In February, Musk promised that he would begin paying creators a portion of Twitter’s ad revenue. in June, he announced that the initial revenue share would total $5 million, which was distributed to eligible creators in July. twitter shares the ad revenue it earns from replying to people’s tweets directly with users, so the more people who reply to a user’s tweet The more people who reply to users’ tweets, and the more people who view the ads in those replies, the more revenue creators can earn. Currently, in order to get paid, you have to purchase the Twitter Blue service and have at least 5 million views on your tweets each month.
Musk, while talking about the possibilities for Twitter on the All-In Podcast, has said that payments could be part of a platform offering like Twitter’s, “whether it’s cryptocurrency or fiat currency.” In the past, Musk has also hinted at making Dogcoin a payment option for Twitter, and has also changed Twitter’s logo to that of Dogcoin.
While no one knows if he’s serious about Dogcoin as a payment option for Twitter or not, does the launch of PYUSD provide yet another new option for the Twitter CEO, who has a strong connection to cryptocurrencies?
3. Loosening Compliance Exposure, Intensifying Circuit Struggles
Since the Web3 conference in Hong Kong in April, the entire crypto world has felt the loosening of crypto policies in mainstream countries, even with the SEC’s strong push in recent months.
On June 16th of this year, BlackRock, one of the world’s largest asset management groups, through its subsidiary iShares, filed an application for a spot Bitcoin ETF with the U.S. SEC, which attracted a great deal of attention from both inside and outside the industry.
On July 21st, U.S. House of Representatives Agriculture Committee Chairman and Pennsylvania Republican Congressman Glenn “GT” Thompson formally introduced a new digital asset regulation bill in the House of Commons, aiming to establish a regulatory framework to protect investors in the crypto industry.
The bill, as amended, excludes a range of traditional securities from the definition of “digital asset,” such as stocks, bonds, “transferable shares,” and “certificates of interest or participation in any profit-sharing agreement.
The arrival of PayPal Stablecoin is another important milestone in the crypto industry’s road to compliance, and it means that the cryptocurrency industry, which started with payments, has another round of imagination. On an individual industry level, however, the launch of PayPal Stablecoin may not bring all good news.
Following PayPal’s announcement of the launch of its payment stablecoin, U.S. House of Representatives Financial Services Committee Chairman Patrick McHenry (NC-10) issued a statement saying, “This is interesting. Another stablecoin has emerged in the United States. It could lead to a reduction in payment revenues, which primarily support MasterCard and Visa. At the same time, it will help the industry grow further and drive sensible regulatory policy.”
This stablecoin launch by PayPal will undoubtedly lead to a decline in USDT’s market share. According to CoinGecko, there are approximately $126 billion worth of stablecoins in circulation, with the largest by far being Tether Holdings Ltd.’s USDT. Tether’s stablecoin, USDT, currently has a 67.2% market share.
While Paolo Ardoino, chief technology officer of USDT issuer Tether, said the launch of the PayPal stablecoin won’t affect Tether because the company doesn’t serve U.S. users. However, shortly after the news of the PayPal Stablecoin launch, USDT has become slightly de-anchored, dropping to near $0.9979, according to official Curve data, which shows that USDT now accounts for 68.82 percent (156,352,796) of the current 3pool.
PYUSD’s path to compliance also seems to highlight the loosening of regulatory policies in various countries and regions. Since Singapore and Hong Kong embraced Web3 and reaped the rewards, there are signs that the US political class is shifting to embrace digital assets: BlackRock filed for a Bitcoin ETF, a court ruled that XRP is not a security, and PayPal issued the stablecoin PYUSD. Changes in the regulatory environment often determine the fate of an industry.
More importantly, the launch of PayPal’s stablecoin, PYUSD, is undoubtedly a milestone in the crypto world – the payments giant has finally completed its years of planning in the digital asset space and opened the door to the crypto world for its 430 million users.
Whether PYUSD can break through the stablecoin market’s longstanding dominance of USDT and USDC, and how PayPal will use PYUSD to revamp its payment ecosystem, are worthy of the industry’s continued attention.