PayPal’s Stablecoin Is a Game Changer in Finance
PayPal announced the launch of PYUSD on August 7, 2023. Five years from now we will be able to look back on that moment and see that it was the turning point of history. Why am I saying this?
So far, most crypto developers have only created crypto. Exchanges and stablecoin issuers have been the biggest players in this space. The blockchains had the largest market capitalizations. Most of the activity in this area has been self-referential. The ICO boom, the DeFi summer, and the rise of NFTs all catered to users and developers already in the space, allowing them to better leverage the technology with one another.
That changed last week. PayPal has over 430 million customers worldwide and points out that blockchain technology is so important that the company will spend years developing a product to further develop its business. PayPal features Venmo and the PayPal app. PayPal now also offers PYUSD.
Blockchains are fundamentally different from other forms of economic organization. A public blockchain is a multi-party interface that allows the exchange of value without the need for a central intermediary.
PYUSD takes us back to the original promise of the blockchain: that a two-legged person anywhere in the world could send value to a second two-legged person without depending on or paying for a financial institution (or worse, a financial institution). endless series of correspondent banks) to facilitate the transaction. Over time, this type of platform will erode monopolies and allow people to build their own financial connections. This platform gives people the power to control their own money.
The value of a blockchain cannot be unlocked unless it is real life uses . PYUSD is changing reality in different places around the world as soon as it becomes available. By connecting a blockchain to the PayPal platform, anyone can send PYUSD to a relative or supplier anywhere in the world. At least that’s the idea: PYUSD will be available in the US for now.
It was the same with previous stablecoins. But there’s an important difference here: a stablecoin can now be converted into a PayPal account. The disbursement takes place quite simply over conventional rails. You can keep it as a stablecoin and let others use the off-ramps. Options and liquidity add value. PayPal has evolved blockchains with PYUSD (it’s built on Ethereum) from a pure many-to-many blockchain for transactions to a many-to-many blockchain for options for what to do after the transaction.
This sea-change will lead to a gradual increase in blockchain adoption and cheaper, faster transactions. Many companies and individuals are waiting, unsure if they can trust crypto-native stablecoins or if crypto-native platforms are stable. They also wonder if other people would use the technology to justify their time and investment.
PYUSD is the answer to these questions. PayPal, which has operated as a global payments network for decades, has built on the NYDFS stablecoin standard through a partnership with Paxos. PayPal has also securely processed large amounts of money without losing user funds. Other developers and companies can now safely integrate the PYUSD stablecoin into their apps, protocols, wallets or internal systems.
PayPal can now abstract from the fact that cryptos are used. This allows them to update the backend and still provide the customer with a similar product experience. It will take years or decades to complete this. This week the snowball was pushed down the hill.
The geopolitical and regulatory implications of PYUSD should not be understated. Stablecoins will be around for a long time. These efforts will increase as technologists and financial professionals understand the implications of blockchains. PYUSD is one of two stablecoins using what is probably the best regulatory framework in the world. It is proof that stablecoins are possible and can be implemented on the same principles of fairness, consumer protection and stability that we value in our traditional financial system.
PYUSD is a call to action to promote positive technological advances and a warning to anyone who believed this issue would just go away. The people who thought that run-down, entrenched monopolies would simply linger are now proving they’ve been taught wrong. PayPal is the first traditional company to scale and become the first Web 2.5 company to combine blockchain and finance at a level previously unattainable.
I have never been more optimistic about the future of finance.
