PayPal, the major payment giant, has recently announced the launch of its stablecoin called PayPal USD (PYUSD) on the Ethereum platform. This new stablecoin is backed by the US dollar, short-term US government bonds, and other cash-equivalent assets, similar to other stablecoins like USDT or USDC.
The issuance of PYUSD is a result of a collaboration between PayPal and Paxos, the company responsible for issuing the stablecoin BUSD on the Binance exchange. Paxos had faced regulatory challenges in the past, but the plan to launch this stablecoin had been in the works before and was temporarily delayed due to the issues with the US government earlier this year.
Interestingly, prior to this, PayPal had previously partnered with FTX to launch $PYUSD on the Solana blockchain in 2022, but that plan was put on hold due to some problems with FTX.
Initially, the PYUSD stablecoin will be available in the US market through the PayPal app and later expand its support to the Venmo app. Eligible PayPal customers can now use this stablecoin for money transfers and purchases.
PayPal expects PYUSD to gain popularity in the crypto and Web3 space, enabling functions like shopping and trading various crypto tokens before its wider adoption.
CEO Dan Schulman believes that PYUSD will strengthen PayPal’s position in the electronic payment industry by providing users with a fast and direct blockchain-based money transfer method without intermediaries.
However, right after the news of PayPal’s stablecoin launch, Patrick McHenry, the chairman of the US House Financial Services Committee, extended his call for the issuance of stablecoin regulations. The legislation has been passed by the committee but not yet enacted into law.
The PayPal announcement serves as a clear signal that stablecoins, if issued within the legal framework, will play a significant role in the 21st-century payment system.
While some people in the community celebrate the introduction of a stablecoin by a big player like PayPal, others express concerns about the lack of decentralization. Particularly, some smart contract auditors have highlighted functionalities in the PYUSD smart contract like ‘freezefunds’ and ‘wipefrozenfunds’ as examples of possible centralized attack vectors in Solidity contracts.