Thursday, 21 September 2023

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PayPal’s new PYUSD stablecoin faces legal headwinds and ‘less functionality’

PayPal’s new PYUSD stablecoin faces legal headwinds and ‘less functionality’

Although a clear regulatory framework for digital assets has yet to be established in the United States, PayPal — one of America’s largest financial technology companies — announced on Aug. 7 its U.S. dollar-pegged payment stablecoin, PayPal USD (PYUSD)

A PayPal spokesperson told Cointelegraph that PYUSD is important because mainstream adoption of future digital experiences will require a stable digital instrument that is crypto-native and easily connected to fiat. Despite the unclear regulatory environment for digital assets in the U.S., the spokesperson said:

“Our experience tells us that the time is ripe to modernize and upgrade the technological infrastructure of the financial system — and we want to help businesses and consumers adapt and engage. That is why we are launching a PayPal stablecoin, which is designed to eliminate price volatility found in other digital currencies while enabling confident payments.”

The case for PayPal’s ability to affect stablecoin adoption with its new project is strong, as recent statistics show that over 426 million PayPal accounts are currently actively used. The company also has a market share of just over 50% of the global online payment processing arena.

Understanding the potential impact of PYUSD

While it’s certainly notable that PayPal has launched PYUSD, there are several considerations to keep in mind.

Alex Tapscott, the co-founder of the Blockchain Research Institute and a business author, told Cointelegraph that PayPal clearly understands that stablecoins will be foundational to the future of financial services and payments in particular. He said stablecoins have already proven incredibly lucrative as a business:

“It’s no surprise why PayPal and others might want to enter the market. PayPal is currently facing stiffer competition in its legacy payments business and is looking for ways to diversify into higher-margin areas. Stablecoins are a logical fit, and potentially a lucrative one at a time when Tether’s recent earnings report suggests that it’s poised to post a bigger profit than Starbucks, BlackRock — and even PayPal itself.”

However, there are both advantages and disadvantages that will likely arise with PYUSD. One of the most obvious benefits is that PYUSD may help onboard mainstream users to the Web3 space.

“The biggest advantage of PYUSD is that it is more likely to get integrated into our digital economy as a payments tool that everyday people can use,” said Tapscott….

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