Paypal, the world’s largest online payment platform, has announced its entrance into the stablecoin race. This move makes Paypal the first major US fintech company to have its own stablecoin, pegged to the dollar (PYUSD).
Paypal’s entry into the stablecoin market is seen as a major challenge, as it is already dominated by Tether (USDT) and Circle (USDC). This comes at a time when public interest in digital currencies has decreased after the 2021 bull market.
Jose Fernandez Da Fonte, senior vice president in charge of Paypal’s cryptocurrency project, expressed confidence in this decision, stating, “I am confident in the timing now and I believe we will have a competitive advantage in the market.”
During a CNBC appearance, Fernandez Da Ponte elaborated on his ambitions with Paypal. He emphasized that stablecoins are the most important applications in the blockchain market, highlighting their advantages in terms of cost, programmability, and speed of payment. He also debunked the misinformation surrounding Paypal’s suspension of stablecoin development in February, stating, “We can’t ignore stablecoins.”
However, Fernandez Da Ponte faced challenges along the way. In February, the New York Financial Supervisory Service pressured Paxos Trust to end its relationship with Binance’s BUSD stablecoin, leading to speculations about Paypal’s cryptocurrency-related business. Additionally, the bankruptcy of major banks involved in cryptocurrencies, such as Silvergate, Signature Bank, and Silicon Valley Bank, directly impacted the stablecoin market. As a result, stablecoin market capitalization has fallen by 25% from its peak.
Despite these challenges, Fernandez Da Ponte believes that Paypal’s success lies in its regulatory compliance and risk management infrastructure. He stated, “We are regulated in many countries and have been using all our infrastructure for years in terms of risk management and compliance. This is a significant asset that differentiates our approach to cryptocurrencies.”
So, what makes stablecoins appealing? Stablecoins are generally pegged to the US dollar, maintaining a value of one dollar each. They offer advantages in terms of utility, enabling quick and cost-effective payments. Private stablecoins, like Paypal’s PYUSD, play a role in boosting demand for the US dollar and offer advantages in payments and transfers. For instance, a PYUSD transfer allows for quick international transactions, taking only seconds to minutes, while traditional banking methods can take 3 to 5 days.
Paypal has an overwhelming advantage with its existing user base of 435 million people. This large audience of consumers and merchants makes it well-positioned to make cryptocurrency accessible to them. Additionally, Paypal enables the connection between fiat currency and cryptocurrency, a feature not supported by most top global banks.
Beyond payment and settlement, Paypal aims to support payments in Web3 and digital native environments. The company plans to apply PYUSD in the online gaming market for digital goods, which is valued at 1 trillion dollars.
While Paypal’s entrance into the stablecoin market is promising, the future remains uncertain due to regulatory challenges. The launch of PYUSD and its associated app will initially target US users in compliance with regulatory requirements. As cryptocurrency regulation in the US is still unclear, it may take some time for the revolution to happen.
However, Vice President Fernandez Da Ponte believes that Paypal’s 20-year history in payments and settlements will serve as a competitive advantage in the stablecoin market. He stated, “What we do is run a regulated business, and we manage a strong regulatory framework and infrastructure. We have seen institutional interest, the demand for tickets, and regulation evolve. I think this is the right time for us to step in.”
[블록미디어 오진석 기자] On the 7th, the world’s largest online payment platform, ‘Paypal’, announced stables and the application of the platform. This makes PayPal the first major US fintech company to have its own stables pegged to the dollar (PYUSD).
What the market is paying attention to is that PayPal is entering the stablecoin race that is already dominated by Tether (USDT) and Circle (USDC). It is being evaluated as a major challenge at a time when public interest in digital currencies has declined after the 2021 bull market.
Jose Fernandez Da Fonte, senior vice president overseeing the cryptocurrency project at PayPal, commented on these points:
Fernandez Da Ponte, PayPal’s senior vice president, appeared on CNBC. [출처=CNBC]
“I am confident in the timing now and I will have a competitive advantage in the market”
On this day, Vice President Fernandez Da Ponte revealed his ambitions with PayPal in a CNBC appearance on the 8th (local time). He went on to explain that “stablecoins are the most serious apps in the blockchain market,” and “have advantages in terms of cost, programmability and speed of payment.”
“We can’t ignore stablecoins,” he continued, speaking of misinformation about PayPal’s suspension of stablecoin development in February.
At the time, the New York Financial Supervisory Service (NYDFS) pressured Paxos Trust, the issuer of Binance’s BUSD stablecoin, to end the relationship. As a result, a Bloomberg article came out asking if PayPal’s cryptocurrency-related business would also end.
This was not the only difficulty that entrusted Fernandez da Ponte.
In March, major banks that had reached out to the cryptocurrency market went bankrupt. Silvergate, Signature Bank, and Silicon Valley Bank were closed in the United States one after the other. The death sentences of three commercial banks involved in cryptocurrencies had a direct impact on the stablecoin market. USDC Circle lost its peg to the US dollar. The market is starting to question whether stablecoin issuers can fully trust collateral.
Under these circumstances, the stablecoin’s market cap has fallen by 25% from its peak. It fell 12% from 139 billion dollars (about 184 trillion won) at the beginning of this year to 122 billion dollars (160.7 trillion won) in August.
The stablecoin market is shrinking [자료=더블록]
The US Securities and Exchange Commission has identified Binance and Coinbase, the largest exchanges in the world. It is not a very kind business environment for cryptocurrency companies.
Vice President Fernandez Da Ponte argues that these difficulties will be a factor in PayPal’s success.
“We are regulated in many countries and have been using all our infrastructure for years in terms of risk management and compliance,” he said. “This is a significant asset that differentiates our approach to cryptocurrencies.
So, what is the appeal of stablecoins?
Stables are generally pegged to the US dollar, maintaining a value of one dollar each. It is not a cryptocurrency that can be profited from by trading. PayPal addresses the utility (utility) of stablecoins here.
In the United States, all commercial banks already have ‘electronic dollars’ prepared by the reserve requirement system. It is used to transfer money from one bank to another or between countries. Just like when we transfer cash through banking, it doesn’t actually move money. However, this is electronic money that moves within the current financial system, and moves within a locked system.
There is also a stablecoin CBDC issued by the central bank. CDBC is essentially a digital replica of US dollar cash, fully regulated and governed by a central authority. Some argue that CBDCs are safer than any private stablecoin. However, CBDC is unfortunately likely to have to trade security and business convenience.
Therefore, dollar-pegged stablecoins issued by private companies are exempt from this. Doubts about USDT and USDC, fueled by the debate over reserve requirements in March, have subsided, and trading is relatively easy.
Instead, private stablecoins appear to be useful in boosting demand for the US dollar. “There are some things you can’t do with fiat money,” said Fernandez Da Ponte, PayPal’s vice president, explaining the advantages “there are strong advantages in payments and payments.”
With a PYUSD transfer, you can send money abroad within seconds to minutes. If you use the current international payment network SWIFT through a general bank, it takes 3 to 5 days.
“It’s about expanding the market pie,” PayPal vice president Fernandez Da Ponte told CNBC. “I saw a call for a less complicated alternative,” he said, “and identified that market.”
First of all, PayPal has one overwhelming advantage.
That’s 435 million people who already use PayPal. That is based on the number of active users. “We have a large audience of consumers and merchants (B2B), and we are well positioned to make them accessible (with crypto),” he explained.
He also emphasized the connection to fiat currency. It is said to enable ‘On-Ramping’, which means interconnection between cryptocurrency and fiat currency. As of last July, none of the top 30 banks in terms of global assets under management support onramping. (CoinGecko)
“We always say that we play a role in building the pipeline between fiat money and Web3,” Fernandez Da Ponte told CNBC with this confidence.
In this regard, Andy Bromberg of the crypto company Eco said, “PayPal’s Ethereum-based stablecoin is a sign of trust,” and “a sign that the traditional financial industry will gradually move into this space.”
In fact, PayPal is said to have the infrastructure to transfer PYUSD out of the PayPal ecosystem. “You can move PYUSD from your PayPal wallet to an external wallet,” Fernandez da Ponte said, “and we won’t charge transfer fees for that.” However, he added that there is no choice but to pay the Ethereum fee.
On the other hand, what PayPal aims for is not only payment and settlement.
PayPal’s vice president said it will support payments in Web3 and digital native environments. It is an aspiration to apply PYUSD in the market of online game digital goods (in-game purchases, etc.) worth 1 trillion dollars.
But will only light shine on PayPal’s future?
PYUSD and the app backed by this stablecoin will be launched ‘in the US’ for ‘Americans’. This reflects the position of financial authorities in relation to offshore transactions as a subject of regulation.
Vice President Fernandez also explained, “I know this well, but the revolution will not happen immediately.” He regretted, saying, “Paying with fixed coins in shops near the neighborhood does not happen immediately.”
As such, cryptocurrency regulation in the United States is still uncertain. Attempts to issue a stablecoin by Meta (Facebook), an IT conglomerate with the 8th largest market cap in the world, were also futile.
Regarding such regulatory uncertainty, Vice President Fernandez Da Ponte announced that he would use Paypal’s 20-year history in payments and settlements as a competitive advantage in the stablecoin market.
“What we do is run a regulated business, and we manage a strong regulatory framework and infrastructure,” he said.
“We have seen institutional interest, the demand for tickets and regulation evolve,” he said. “I think this is the right time for us to step in.”
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