PYUSD: PayPal’s Foray into Stablecoins

BingX
6 min readSep 19

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In the early days of the crypto industry, one of the biggest goals of the whole industry was to get large firms and organisations involved in the movement. The crypto industry’s desire to grow beyond retail appeal keeps becoming a reality daily.

Right now, the crypto industry has finally gotten a lot more institutional appeal, with large firms like PayPal now interested in the industry. PayPal is getting into the crypto space by launching its own stablecoin called PYUSD.

In this article, we will help you know the basic facts about PYUSD stablecoin and PayPal’s gradual movement into web3.

PayPal

Overview of PayPal’s Entry Into the Stablecoin Market

PayPal has made a gradual entry into the crypto market, but the most prominent milestone dates back to 2020 when it began integrating several crypto services bit by bit before exploding to major milestones.

In 2020, PayPal started allowing its users to buy, sell, and hold some cryptocurrencies on its platform. This was a huge statement from the financial giant back then, coinciding with when the last bull market was just about to break out. Since 2020, they have been improving their services to integrate crypto products. Now, the latest from them is the PYUSD, which is a stablecoin that seeks to serve the crypto industry even better.

What is PYUSD?

PayPal

PYUSD is just like any other stablecoin and in case you don’t know what stablecoins are, here’s a dive deep. Stablecoins are simply digital currencies that maintain a fixed price in the crypto industry. In fact, you can see it as the connection between the crypto industry and the conventional financial sectors.

Moat stablecoins are backed by physical stable currency and such represents the fiat currency, which might be the US dollar, British Pound, or the Euro. Furthermore, the major difference between stablecoins and other cryptocurrencies lies in the massive reduction in volatility. So, stablecoins always try to maintain the same value as the currency it is pegged with. So, assuming this is pegged with the US dollar, it will always try to keep a 1:1 value against the dollar. The same applies to the PYUSD — Paxos Trust Company issues this stablecoin.

PayPal USD also known as (PYUSD) is a stablecoin, whose primary purpose is to facilitate transactions within the blockchain ecosystem. It was recently launched and is currently only available to eligible customers in the United States. Nevertheless, the financial giant will likely extend the stablecoin services worldwide.

In the case of the PYUSD, it is pegged to the US dollar and tries to maintain the same value as the dollar. According to PayPal, their stablecoin is collateralised and backed by short-term U.S. treasuries, USD deposits, and other cash equivalents.

Why Did PayPal Launch its Stablecoin (PYUSD)?

The primary reason that PayPal launched PYUSD was to tap into the hige crypto market share of the future of finance. Since they represent a payment institution, launching a cryptocurrency with less volatility and more use cases was much easier and better. The stablecoin sector is a huge and integral part of the crypto market, and it even has larger trading volumes than many other prominent cryptos like Bitcoin and Ethereum. A stablecoin, like the USDT, is mostly the number one crypto in the daily trading volume rankings.

Besides setting itself up as a significant player in crypto for the years to come, PayPal says launching the PYUSD will help it achieve its goals. They want to make the relationship between crypto and conventional finance easier than in the past. Their PYUSD will have good support for quick transfers such as remittances. Furthermore, the PYUSD will also support the Web3 sector. In other words, the PYUSD will give you better control of your identity and data while making transactions.

Impact of PYUSD in the Crypto Industry

For other competing stablecoins and the whole crypto community, the launch of the PYUSD has a strong impact and is mostly positive. The first impact here is that it will help drive the message of crypto adoption home.

A large and experienced financial institution like PayPal defying expectations to create its own stablecoins shows how much the crypto industry is moving in the right direction. At last, many financial giants are finally seeing their future in the crypto sector.

Most importantly, the PYUSD will impact the crypto industry by driving the adoption of cryptocurrencies. Their Q1 data in 2023 shows that PayPal has about 435 million active users. Presenting a product like the PYUSD to a large audience like this is like hitting a jackpot. Assuming only 10% of their users accept this new product, that’s about 45 million persons.

PayPal’s Q1 data

On the other hand, the impact of the PYUSD on, specifically, the stablecoin sector is more competition. You now know that other big players, such as the USDT and USDC, now have competition from a big brand. Nevertheless, the PYUSD should look to change some dynamics of the stablecoin sector with their launch into Web3.

Challenges and Hurdles for PYUSD

Undoubtedly, the PYUSD has a lot of challenges facing it in its entrance into the crypto industry. Imagine competing with the USDT, which already has more than $80 billion in market capitalisation. In simple terms, the PYUSD will face steep competition in the market.

Stablecoins like the USDT, USDC, TUSD, DAI, BUSD, and many others already hold existing market shares. Besides the competitors and breaking into the market, the PYUSD will face challenges with market acceptance for a regulated stablecoin.

What Are the Market Opportunities for PYUSD?

The most enormous opportunity the PYUSD has in the stablecoin sector is its brand name backing which will confer such brand trust. In fact, PayPal is more likely to find its target customers within its already existing user base.

PayPal has a huge brand name. Since many people already know how largely reputable they are, they might be more inclined to use the PYUSD.

Next would be emerging as a competitor, particularly in the U.S. market against USDT and USDC for a regulated stablecoin. When you are using a stablecoin provided by PayPal, you feel safer. Moreover, the financial giant stands in the good book of regulators.

What Next?

PayPal USD (PYUSD) is a stablecoin launched by the financial giant in 2023 to further deepen its journey in the crypto industry. This stablecoin is pegged to the U.S. dollar and is backed by short-term U.S. treasuries and USD deposits.

PayPal launching this stablecoin brings a lot of good for the crypto industry, as it will help drive adoption.

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