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PayPal To Issue Stablecoin, Backed By Paxos
PayPal will issue its own dollar-backed stablecoin, assisted by Paxos - who were recently targeted by the SEC.
Payments giant PayPal has surprised the crypto world by announcing it is launching its own dollar-backed stablecoin in partnership with Paxos. PayPalUSD (PYUSD) will take the form of an ERC20 token on the Ethereum blockchain.
Over the coming weeks, PayPal says that eligible customers will be able to use PYUSD to:
- Transfer funds between PayPal and compatible external wallets
- Send person-to-person payments
- Fund purchases by selecting PYUSD at checkout
- Convert any of PayPal's supported cryptocurrencies to and from PayPal USD
PayPal USD will be fully backed with cash and US Treasuries, and can be bought or sold through PayPal at a rate of $1.00 per PayPal USD.
An Unexpected Move
The move comes as a shock for several reasons. This is the first time that a major company has entered the stablecoin sector, which is currently dominated by USDT and USDC.
Secondly, stablecoins have been the subject of intense regulatory scrutiny since the collapse of Terra/Luna over a year ago, which saw a $60 billion ecosystem essentially disappear overnight.
Moreover, Paxos has recently been targeted by the SEC, which issues USDP and will do the same for PYUSD. A white-labeled version version of USDP served as Binance's native stablecoin (BUSD), until it was shut down by the SEC. This had the (presumably) unintended side-effect of allowing USDT, a more opaque alternative, to flourish.
PayPalUSD will initially be available to US users, which again is unexpected. Paxos is regulated by the New York Department of Financial Services (NYDFS), and USDP is the most regulated stablecoin in the world. Given that the SEC forced Paxos to stop minting BUSD, and sent the organization a Wells Notice (typically received prior to enforcement), arguing that the offer and sale of BUSD was an unregistered security, it's strange that they should apparently be free to do the same with PayPal.
Changing Times For Crypto
However, the landscape for crypto has changed over the last few months, as big players have entered the space. Just as BlackRock may prove to have the clout to push a Bitcoin ETF past the SEC, perhaps PayPal is powerful enough to do the same with a new stablecoin.
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