Over the last couple of years, several technologies were introduced by blockchain technology and decentralised economies, taking cryptocurrency security and utility to a whole new level.
Ethereum introduced new security reforms, Bitcoin added more functionalities to its blockchain, and new stablecoins made their debut in the market. Conversely, regulated markets were suffering from increased interest rates and decreased investor confidence.
These events led to increasing demands to incorporate elements of decentralisation in centralised finance. PayPal made a late appearance in the crypto market after several demands to support cryptocurrencies in their wallets.
PayPal launched PYUSD, the stablecoin and cryptocurrency backed by USD. Let’s review this new coin, what it means to competitors, and what the expectations are.
Overviewing PayPal’s Crypto Ventures
After years of relying on centralised payment methods and systems, PayPal added a couple of virtual currencies to its US users by adding BTC to the list of supported currencies in 2020. Users could purchase and shop online using Bitcoin as a payment method, although on a smaller scale.
A couple of months later, the company added Ethereum, Litecoin and Bitcoin Cash to its supported currencies, enabling customers to buy, sell and store more cryptocurrency in their PayPal digital wallets.
However, this introduction was only limited to customers in the US, excluding business accounts, which somehow hindered mass adoption.
Introducing: PYUSD PayPal Stablecoin
In August 2023, PayPal launched its native cryptocurrency: PayPal USD (PYUSD), a stablecoin with a 1:1 peg to the US Dollar, bridging the gap between fiat and virtual payment methods, allowing customers to transact and transfer money using PayPal’s crypto PYUSD.
PYUSD is minted with ERC-20 standards on the Ethereum blockchain, allowing it to enjoy much of the security measures developed by the ETH network. Moreover, PayPal relies on its robust security system as an experienced centralised payment processor.
PayPal USD is backed by short-term treasuries and USD cash capital, ensuring sustainability and peg stability.
This introduction allows PayPal to onboard more users from decentralised economies, such as Web 3.0 enthusiasts, crypto communities and digital users. PYUSD will power users to operate on various dApp and DEXes, extending the use cases of the newly introduced stablecoin.
Unlike previous limitations of crypto payment methods, PYUSD is available for personal, business and merchant accounts, where users can send, receive and purchase using PYUSD, besides seamlessly exchanging PYUSD with other fiat currencies.
Impacts on the Stablecoins Market
The stablecoin market enjoys little competition, with two currencies taking up the biggest share: USDT (Tether) and USDC (USD Coin). However, the introduction of a new stablecoin by the payment processing giant is definitely not a short-term utility, indicating possible competition by the new PYUSD.
The growth of PYUSD is dependent on several factors, such as being listed on crypto exchanges. Currently, Coinbase and ByBit are among the top platforms that enable trading and exchanging PYUSD. Listing the currency on more exchanges can definitely boost its growth.
On the other hand, being limited to US customers only may restrict the potential of PYUSD. Nevertheless, USDT and USDC are already incorporated into most centralised and decentralised exchanges and play a major role in most Web 3.0 platforms and dApps.
- Tether – USDT
Tether is one of the oldest stablecoins, established in 2014. Its massive growth over the years placed it as the 3rd cryptocurrency in terms of market capitalisation and utility.
USDT is fixed with a 1:1 peg to the USD, which limits it from being used as a trading instrument. However, its major security measures and advanced use cases make it the most important stablecoin, with over $90 billion in market capitalisation.
- USD Coin – USDC
USDC was established in 2018 by Circle, the same company that introduced EURC (Euro Coin) the last year in 2022. USDC is created with the ERC-20 protocol, giving it many security features stemming from the Ethereum blockchain.
USD Coin introduced various Web 3.0 adoptions and functionality, allowing users to interoperate with Tron, Polygon and Avalanche blockchain networks. USDC currently ranks as the 7th crypto in market cap with $24 billion, compared to less than the $160 million cap of PYUSD.
Conclusion
PYUSD is a stablecoin introduced by PayPal, marking the first major venture in the decentralised world. PYUSD is fixed with a 1:1 mechanism against the US Dollar and backed by cash capital and US treasuries to maintain its fixation.
This introduction can definitely disrupt the stablecoin market, creating a new competitor to USDT and USDC, especially with the various utilities of PYUSD in dApps and Web 3.0 projects.
