In a groundbreaking move for cryptocurrency, PayPal has launched its very own stablecoin, PYUSD. While not the first of its kind, PYUSD differentiates itself as the pioneer in regulatory oversight and customer asset protection.
A collaboration with trust company, Paxos, PYUSD is under the vigilance of the New York Department of Financial Services (NYDFS). Walter Hessert, head of strategy at Paxos, underlines the significance of this regulatory oversight, which extends to every activity, including reserve management. He asserts that this is a safeguard, offering protection to any token holder, regardless of location. He goes on to add that the rules set by the NYDFS introduces a crucial safeguard against bankruptcy risk.
Highlighting the frequent occurrence of bankruptcy amongst crypto companies, Hessert points out the vulnerability of customers in these scenarios who ultimately end up as general creditors. Unlike its stablecoin contemporaries, if Paxos were to become bankrupt, the NYDFS would intervene, excluding PYUSD from the bankruptcy. As a result, customers would not end up as unwitting creditors, and their funds would be returned.
Interestingly, the dominant players in the stablecoin world, including USDT by Tether and USDC by Circle in collaboration with Coinbase, seem unperturbed by PayPal’s entry. However, some suggest that PYUSD could provide stiff competition to USDC, which has experienced a dip in market capital following the fall of Silicon Valley Bank.
Oddly enough, PayPal’s newest venture into the stablecoin arena is perceived to pose little threat to Tether. Paolo Ardoino, Tether’s CTO, attributes this to the fact that PYUSD has yet to penetrate the U.S. market.
PayPal’s immersion in the crypto world has been gradual yet steady, mirroring the trajectory of the likes of Block and CashApp. The introduction of PYUSD, though, marks a significant technological step forward.
Predictably, both Tether and Circle will store reserves in U.S. treasury bills, with the interest gained being equally divided between PayPal and Paxos. But, as Hessert suggests, despite transparency, both USDT and USDC fall short on the regulatory front. Ultimately, whether the security offered by PYUSD will sway dedicated followers of USDT and USDC remains to be seen.
Source: Coindesk
