In a landscape defined by financial intricacies and technological dynamism, the recent incursion of PayPal (the global giant in payment solutions) into the realm of stablecoins via the introduction of PayPal’s USD (PYUSD) has set in motion a series of compelling discussions. This calculated manoeuvre has sparked inquiries into the motivations underpinning this strategic shift and the consequential ripple effects in the financial economy. Amidst the nuanced tapestry of regulatory considerations, the eminent stature of PayPal bestows upon it an influential role, transcending the pursuit of mere profit. Whilst the immediate objective of PYUSD is unmistakably linked to generating revenue, a more profound purpose emerges juxtaposing this move against the financial achievements of its counterparts. The impressive financial milestones of Coinbase’s USDC stablecoin and Tether (making $199 million and $1 billion in Q2 2023 respectively and attained without leaning on stablecoin income) underscore the strategic significance of PayPal's transition. Beyond a financial beneficiary, PayPal emerges as a substantive participant in the burgeoning digital economy, ushering-in a paradigm shift beyond conventional confines - although if PayPal is able to emulate the success of USDC and Tether, this would no doubt support PayPal’s share price which is down almost 40% in the last 12 months. The introduction of PYUSD certainly marks a pivotal juncture in PayPal's trajectory, serving to be the cornerstone as a medium for transactions in the emergent digital frontiers - be it the expansive metaverse or the intricate terrain of being able to pay income streams for digital equities, bonds and funds, etc. This transformative pivot heralds PayPal's departure from its conventional role as a payment processor to a creator of a product for other payments agents to use as well. In doing so, PYUSD becomes an enabler for a future where the convergence of finance and technology emerges as a seamless tapestry.
Meanwhile, parallel to this narrative, the voyage of Paxos Trust Company (encapsulated by its Paxos stablecoin) unfolds as a testament to tenacity and ingenuity. Conceived by Charles Cascarilla and Rich Teo in 2012, Paxos has earned its place in the regulated cryptocurrency landscape, securing authorisation to provide services in New York. The essence of Paxos's stablecoin unravels through an exploration of its significance and the robust security apparatus underpinning it. Diverging from its counterpart and intrinsically linked to gold's value. Meanwhile Paxos also offers a US$ stablecoin (USDP) which is designed to maintain a 1:1 correlation with the US dollar. Beyond its utilitarian role in cryptocurrency transactions, USDP serves as an accessible gateway for those navigating the intricate topography of digital currencies. In tandem, PAX gold (PAXG) facilitates accessibility to the realm of gold investments, effectively mitigating the complexities associated with physical storage. PAXG introduces an additional layer of versatility, enabling the redemption of tangible gold bars thereby facilitating swift settlements and fostering a framework of financial dexterity, and all within a competitive fee range of 0.03% to 1%. Paxos is a licensed custodian, endorsed by the discerning State of New York, but it is currently facing regulatory investigation from the US Securities and Exchange Commission (SEC) because of another stable coin that Paxos is involved with – Binance; it is alleged that the Binance stablecoin BUSD is a security and has not actually obtained the correct regulatory permissions.
This augmentation in regulatory vigilance is an outgrowth of recent market fluctuations and impactful crypto-related incidents, and instances of alleged fraud within platforms such as FTX, coupled with substantial setbacks within the crypto domain, have galvanised conversations centred around investor protection and market integrity. Concomitantly, the assertive strides of the SEC in the realm of enforcing crypto regulations heralds a fresh phase of regulatory attentiveness. This perspective finds tangible expression in the SEC's recent $24million settlement with Bittrex and, earlier in the year, the $30million settlement with Kraken, reverberating with a commitment to challenging the classification of crypto assets. This illuminates the spotlight on stalwart stablecoins, notably Paxos's BUSD. However, one does have to question why not leverage the custodial services of established entities such as BNY Mellon, Fidelity, or State Street? And why not embrace comprehensive audits in lieu of attestations? These inquiries, whilst seemingly rhetorical, encapsulate the nuanced balance between innovation's promise and the weight of accountability that the cryptocurrency realm treads upon.
Source: CCData
Clearly, as the above chart demonstrates, there is demand for stablecoins and as we see more real-world assets being digitised, no doubt we will see other organisations looking to issue their own stablecoins. However, it is unlikely that the FED will wish to see a return to the 1860’s (prior to the issuance of the Greenback) when there were over 7,000 varieties of US$ which were easily counterfeited, so causing confusion circulation problems and potentially undermining the financial markets. PayPal was established originally by Elon Musk and, back in 2017, Musk bought the domain name X.com from PayPal. But, are we to see the re-named Twitter (now called ‘X’) reach out to PayPal and begin using PayPal’s new US$-backed stablecoin as part of Musk’s dream to create a superApp? Moreover, could we see other global brands such as Apple, Amazon, Google use PayPal’s new coin also?
WebThis article first appeared in Digital Bytes (15th of August, 2023),
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