PayPal has launched a PayPal USD ($PYUSD) stablecoin in partnership with Paxos. @Paxos is the issuer of $USDP and $BUSD, and has been managing the stablecoin issuance since 2018. They are the issuer of the token, while PayPal’s role primarily focuses on distribution.
PayPal USD will be “fully backed by US dollar deposits, US treasuries, and similar cash equivalents” in accordance with NYDFS guidance, so it has a pretty restrictive list for the underlying assets. Austin Campbell published a pretty clear explanation of the features involved, answering the most common point of confusion here.
Eligible PayPal users will not only be able to conduct transfers but also make purchases using the stablecoin. Moreover, the platform will allow users to convert ‘supported cryptocurrencies’ to or from PYUSD, as the company said.
The stablecoin will be accessible to external developers, wallets, and web3 applications, ensuring seamless integration with various crypto exchanges, according to the company.
Huobi, amid rumors of arrests in the exchange’s management and concerns about its solvency, has already announced its support for PayPal’s stablecoin launch and has given PYUSD/USDT trading pair with ongoing zero commissions. Previously, Justin Sun also invited PYUSD to issue on the TRON network.
So, the key difference between PYUSD and other stablecoins is that this is the first regulated stablecoin from a global payments company, with customers’ assets protection against bankruptcy.
On the flipside.
To begin with, PYUSD is an ERC-20 token operating on the Ethereum main chain. The choice is obviously driven by NYDFS supervision. However, it also subjects users to notoriously high fees (with surges during periods of heightened activity) and undermines the competitiveness of NYDFS issuers in various future scenarios.
Another point of contention revolves around using an older version (0.4.24) of Solidity, a programming language for smart contracts, which could put PYUSD at a technological disadvantage, given the significant advancements made in the crypto industry over the past four years.
Not to mention that PayPal, similar to other centralized stablecoin issuers, has the ultimate power to freeze addresses and seize funds held in customers’ wallets (see Github). And on top of that, PYUSD’s smart contract deployed on Ethereum is an Upgradeable Proxy, which means the deployer can change the code at any time.