PayPal, a global leader in the financial technology industry, introduced its own stablecoin, PYUSD, diversifying its range of services. This move redefines PayPal's role in the cryptocurrency market by offering a token with the stability of traditional fiat currency, and the flexibility of virtual currencies. While the crypto-verse is already teeming with stablecoins, PYUSD sets itself apart with two unique features that distinguish it from the rest.
While the dominant issuers of stablecoins in the crypto space like Tether and Circle seems not bothered by PayPal's foray into this space, PYUSD bring something fresh into the stablecoins' war that might likely see the stablecoin gaining widespread acceptance. This article will elaborate on those features that set PYUSD apart from its competitors, and why the PYUSD will likely gain wide acceptance in the crypto space in the near future.
1. PYUSD is the first stablecoin to overseen by a regulator
PayPal stablecoin PYUSD will be the first to bring regulation to the crypto space. Its partnership with Paxos, a trust company regulated by the New York Department of Financial Services (NYDFS), will oversee the issuances of PYUSD. This is noteworthy since the NYDFS did not only approve Paxos Standard, but also trust their decision on what partnership they entered.
What that implied is that, PYUSD comes with a regulatory authority overseeing everything, including its issuance and reserve management. This will put PYUSD on a higher pedestal than other stablecoins, enabling it to give oversight protection to anyone who used or holds it. Since Paxos Standard is already regulated in the US, we can expect PYUSD to have the same. With this, you can consider PYUSD as a "Stable Digital Currency" offering the characteristics of a cryptocurrency and the security of a fiat currency at the same time.
No stablecoin have such a regulatory authority for now, and with this development, PYUSD will be highly favored by the traditional finance community, given that PayPal comes with a background of having larger than life success and dominance in the traditional financial market.
2. PYUSD comes with protection against bankruptcy risk
Although many blockchain based stablecoins have experienced massive crash over the years, with users having no means of ever recovery their assets, PYUSD offers a layer of protection against loss. The Paxos Standard has the ability to recover users assets in a case of bankruptcy or insolvency. This guarantees the user will not have to take any additional legal action to recover his or her coins.
This is already a kind of insurance for investors. The Paxos Standard is able to refund investors with 100% of their initial holdings in the case they go bankrupt. Should Paxos became bankrupt, its regulator, the NYDFS, would bail PYUSD out with the interest that came into the fund on the reserve T-bills , thereby giving users a safety net.
This kind of protection, similar to that of a pension fund or even insurance coverage, will benefit users, since PayPal holders won't need to engage in expensive litigation proceedings to recover their money.
Is PYUSD a threat to other stablecoins in the crypto market?
While this might be the case, it is important to note that we have yet to see PYUSD compete with the existing stablecoin offerings in the market. Tether the issuer of USDT may not be bothered about the features of PYUSD since it already has a larger global distribution, and an all-time high market cap of $83.4 at the time of writing this article.
PYUSD could be a major competitor to Circle's USDC that has been experiencing a steady downtrend in its market cap since the collapse of Silicon Valley Bank (SVB) in March this year. Overall, there are more than 15 stablecoins in the market. As of right now, none of them have the following that PYUSD has.
The similarities between PYUSD and other US dollar pegged stablecoins is that of it's reserve, which is held in the US Treasury bills. One more thing, like other stablecoins, PYUSD is also subject to volatility even though it's a stablecoin. That is a common characteristic of the stablecoin market.
PYUSD is in a league of its own
PayPal's partnership with Paxos is not only a major vote of confidence for the release of its stablecoin, but also shows the potentials of PYUSD. With PayPal been a global merchants platform, there is a big possibility of PYUSD being used more widely by PayPal merchants than any other stablecoin. Hence, it is inevitable that PYUSD will develop into a household name in the crypto community.
Even with its similarities with other stablecoins, PYUSD will also develop a unique market share, since there are about 392 million verified PayPal accounts in the world by August 2023.
This is not only an indication for PYUSD's success in the market, but a message to the entire stablecoin market that the potential of stablecoin has yet to be harnessed.
Bottom line
We have only scratched the surface when it comes to PYUSD's development. Expecting the PYUSD token to go all the way and overtake the share that USDT has, is probably a far cry. For that to happen, we need to see that adoption in the ecosystem goes well. This is expected to happen as PYUSD was designed with future growth in mind, with its multipurpose function and ability to process payments in a fraction of the time that other cryptocurrencies take.
The future of PYUSD is bright and no doubt, with PayPal global reach, PYUSD has the potential to become a household name in the crypto world.
Disclaimer
This article is an information document and should not be taken as financial advice. Please do your own research before making any investments.
The lead image is a screenshot from Paypal website.
Posted Using LeoFinance Alpha