PayPal Unveils Its USD-backed Stablecoin PYUSD, Will It Threaten Tether USDT?

In a major announcement on Monday , August 7, American payments giant PayPal launched its native stablecoin PYUSD pegged to the U.S. Dollar. This is a significant move from PayPal ever since it stepped into the crypto market back in 2020.

Paxos Trust Co. will be issuing the PayPal USD (PYUSD) stablecoin which is backed entirely by US dollar, short-term Treasures and other cash equivalents. Through PYUSD, CEO Dan Schulman aims to solidify PayPal's leadership in digital payments. He is utilizing technology that allows quick and cost-effective transfers without relying on a central middleman. “The vision over time is that this becomes a part of the overall payments infrastructure,“ said Schulman in an interview.

PayPal USD is an ERC-20 token and an Ethereum-based stablecoin and shall be available to consumers, merchants and developers, in order to seamlessly connect fiat and digital currencies.

PayPal USD, an ERC-20 token launched on the Ethereum blockchain, will be accessible to a large and expanding community of external developers, wallets, and web3 applications. It can seamlessly integrate with exchanges and will be utilized to enhance various aspects of the PayPal ecosystem. Initially, PayPal plans to use the PYUSD stablecoin mainly in the cryptocurrency and web3 sectors. This will be either for trading in and out of digital tokens or for in-game payments.

PayPal’s launch of PYUSD comes at a time when the regulatory environment surrounding stablecoins remains quite uncertain. However, PayPal has ensure enough protection in this matter. The company engaged in thorough conversations with regulators and policymakers in the US, according to Schulman.

“We are in a place right now in these conversations that people feel comfortable with a respected, well-regulated US financial entity moving into the stablecoin space and think that it’s an important initial move,” he added.

PayPal has made a move in the stablecoin market which seems to be largely concentrated by a few players like Tether Holdings Ltd.’s USDT. Tether currently occupies more than 50% of the $126 billion stablecoin market. It next immediate competitor is Circle’s USDC.

The bigger question is whether PayPal will eat into the competitor’s market share of stablecoins. However, Tether CTO Paolo Ardoino sees no immediate threat with PayPal’s move. "We don't expect any impact on USDT. It's interesting. Another stablecoin in the U.S. It could lead to the erosion of revenues for payments that have been mainly fueling Mastercard and Visa. It will also help the industry to grow further and push for sensible regulations," he added.

Jeremy Allaire, the founder of Circle, expressed his excitement about a major internet and payments company entering the stablecoin arena. He believes that customers will have clear transparency in their transactions, and companies that can withstand the scrutiny of central banks and regulatory authorities will flourish.