Online payments giant PayPal recently announced the launch of its own stablecoin, PayPal USD (PYUSD), which is backed by the US dollar. For this initiative, the company is partnering with Paxos, a stablecoin issuer already involved in the cryptocurrency market. In this article, we will explore the details of this new project and what it means for the crypto ecosystem.
What is PYUSD?
PYUSD is a stablecoin backed by the US dollar, designed to provide a more stable alternative to other cryptocurrencies such as Bitcoin or Ethereum. It runs on the Ethereum blockchain network and was created by PayPal in partnership with Paxos. PYUSD users will be able to enjoy the security and flexibility offered by blockchain technology, while being protected from the volatility often associated with traditional cryptocurrencies.
How does PYUSD work?
PYUSD works like any other stablecoin. It is backed by reserves of US dollar assets, giving it stability against market fluctuations. This allows users to convert their supported cryptocurrencies to PYUSD and transact without fear of losing value due to market volatility. Additionally, PYUSD is an ERC-20 token, meaning it is compatible with most Ethereum-based wallets and platforms.
PYUSD Features for US PayPal Customers
Upon launch, PayPal’s U.S. customers will have access to several PYUSD-related features:
- Transfer their PYUSD to compatible wallets, allowing them to store their cryptocurrency securely and flexibly.
- Make purchases in PYUSD from merchants that accept this payment method.
- Convert their supported cryptocurrencies to PYUSD, giving them a more stable option against market fluctuations.
In order to ensure transparency, PayPal announced that Paxos will publish a monthly public report on PayPal USD reserves, detailing the instruments that make up these reserves. The aim of this move is to strengthen user confidence in the system and ensure the stability of PYUSD.
Potential suspension of the project due to an investigation
However, it should be noted that the project may be temporarily suspended due to an investigation by the New York State Department of Financial Services into Paxos, PayPal’s partner in this project. PayPal has confirmed that it has paused development to understand the change in legislation that will affect digital assets and assures its commitment to comply with all current regulations.
Buying Ethereum via PayPal with MetaMask
Alongside the launch of PYUSD, PayPal also announced a new feature that will allow users of the popular crypto wallet MetaMask to buy Ethereum directly via PayPal. This option is currently reserved for US customers and comes with a fee of around 1%. The integration of this feature on MetaMask browser is planned for the first quarter of 2023.
PayPal’s launch of PYUSD represents a significant milestone in the growing adoption of cryptocurrencies and stablecoins. By providing a more stable and secure alternative to other cryptocurrencies, PYUSD could encourage more people to explore the world of digital payments and enjoy the benefits of blockchain technology. However, the developments in the Paxos investigation and its potential impact on the project will need to be closely monitored.
