PayPal Launches Dollar-Pegged Stablecoin on Ethereum, Community Detect Centralization Approach

PayPal, a prominent player in the digital payment industry, has taken a significant step by introducing a U.S. dollar-backed stablecoin, a move that marks a key milestone in the broader adoption of cryptocurrencies for payments and transfers.

This development comes at a time when the cryptocurrency industry faces regulatory challenges and strives to gain acceptance as a legitimate financial tool.

Today, we’re unveiling a new stablecoin, PayPal USD (PYUSD). It’s designed for payments and is backed by highly liquid and secure assets. Starting today and rolling out in the next few weeks, you’ll be able to buy, sell, hold and transfer PYUSD. Learn more https://t.co/53RRBhmNHx pic.twitter.com/53ur2KmjU7

— PayPal (@PayPal) August 7, 2023

The newly launched PayPal USD named (PYUSD), is fully backed by U.S. dollar deposits, treasuries, and similar cash equivalents. This backing ensures a 1:1 redemption value with the U.S. dollar.

Dan Schulman, the President and CEO of PayPal, highlighted the importance of stable instruments in the transition to digital currencies, emphasizing that the stablecoin represents a critical link between the digital and fiat currency realms.

He emphasized the company’s commitment to responsible innovation and compliance, which underpins their effort to contribute to the growth of digital payments through PayPal USD.

Paypal PYUSD built on Ethereum ERC-20 Network In Partnership With Paxos

Paxos Trust Company is the issuer of PayPal USD, ensuring regulatory oversight and compliance. This regulatory backing provides credibility and stability to the stablecoin. 

Paxos 🤝 PayPal

Thrilled to be partnering with @PayPal to bring PYUSD, the world’s safest dollar-backed digital asset, to hundreds of millions of consumers and merchants worldwide.

PYUSD is the first of its kind, representing the next phase of US dollars on the blockchain. This…

— Paxos (@Paxos) August 7, 2023

PayPal USD’s launch is a strategic maneuver that leverages PayPal’s established position in the payments industry, which has more than 431 million active accounts globally.

As an ERC-20 token on the Ethereum blockchain, the stablecoin taps into a growing community of external developers, wallets, and web3 applications, enhancing its accessibility and usability.

The stablecoin market has seen both successes and challenges, with regulatory scrutiny and concerns about reserves casting shadows on its potential. 

According to a report, the market capitalization of USD Coin (USDC), the largest U.S. dollar-backed stablecoin, has seen a decline of approximately 41% since the beginning of the year.

Meta Inc. faced a significant setback last year when its ambitious initiative encountered strong regulatory opposition, leading to its eventual failure. Similarly, PayPal’s efforts on PYUSD were put on hold in February due to heightened regulatory scrutiny surrounding cryptocurrencies.

McHenry said in a statement on Monday that PYUSD shows that “stablecoins, if issued under a clear regulatory framework, hold promise” for payments 

“A clear regulatory framework”, What does that mean? The community dug further.

“PYUSD Is Centralized” Claimed the community

A Tweet was posted yesterday (Aug 7) by Blockchain Culture, claiming that “the newly launched Paypal USD stablecoin features a built-in “assetProtection” function which can erase your balance in 2 transactions”

𝐏𝐚𝐲𝐩𝐚𝐥 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐤𝐧𝐨𝐰𝐧 𝐭𝐨 𝐫𝐚𝐧𝐝𝐨𝐦𝐥𝐲 𝐟𝐫𝐞𝐞𝐳𝐞 𝐚𝐜𝐜𝐨𝐮𝐧𝐭𝐬 𝐚𝐧𝐝 𝐡𝐨𝐥𝐝 𝐩𝐞𝐨𝐩𝐥𝐞'𝐬 𝐦𝐨𝐧𝐞𝐲 𝐡𝐨𝐬𝐭𝐚𝐠𝐞…𝐢𝐭'𝐬 𝐚𝐥𝐥 𝐨𝐯𝐞𝐫 𝐭𝐡𝐞 𝐢𝐧𝐭𝐞𝐫𝐧𝐞𝐭.

Their newly launched Paypal USD stablecoin features a built-in… pic.twitter.com/ICoOQpem03

— Sunny River (@Architect_333) August 7, 2023

What does this mean?

The recently introduced stablecoin, the Paypal USD, is now equipped with an embedded “assetProtection” mechanism that wields the power to wipe out your account balance through just two transactions: freezing and then wiping the entire balance away.

In the intricate world of smart contract security, this mechanism is recognized as a “centralization attack vector”, hinting at a consolidation of control that contradicts the decentralized fundamentals that underpin cryptocurrencies.

While it may be painted as a step toward “adoption,” it is a far cry from the core philosophy driving Bitcoin and other cryptocurrencies—that is, the belief that if you don’t possess the private keys, you don’t have true ownership or control over your crypto assets.

In essence, while PayPal’s move might seem to align with the concept of broader acceptance, it diverges from the principles that have fueled the rise of cryptocurrencies, where the mantra “not your keys, not your crypto” serves as a poignant reminder of the importance of maintaining personal control and security in the realm of digital assets.

NB: Any Information provided here is NOT FINANCIAL ADVICE. Do Your Own Research before making any Financial Decisions.