PayPal’s PYUSD Stablecoin Takes the Crypto Market by Storm
The stablecoin landscape is undergoing a shift following Monday’s announcement by PayPal that introduced the PayPal USD (PYUSD) stablecoin, giving many crypto holders a third reliable option when it comes to a U.S.-dollar pegged store of value and payment token.
Shortly after the PYUSD news hit the press, Tether (USDT) CTO Paolo Ardoino noted on Twitter that more than $325 million worth of USDT was redeemed on Monday, and highlighted the company’s banking-grade standards that require customers to be fully verified via KYC/AML before they can access services. Data provided by Glassnode confirms that USDT saw significant outflows on Monday, but the overall impact is negligible as USDT is the largest stablecoin by market cap, with a current circulating supply of 83.9 billion tokens worth approximately $83.7 billion.
The second-ranked stablecoin by market cap, USD Coin (USDC), has also seen an increase in redemptions in the wake of the PYUSD announcement. According to Circle CEO Jeremy Allaire, over the past month, Circle has issued $5 billion worth of USDC and has redeemed $6.6 billion USDC.
Allaire also took the opportunity to congratulate PayPal and Paxos on the new stablecoin launch, saying, “It’s incredibly exciting to see such a significant internet and payments company entering the stablecoin space.” Allaire also addressed concerns that PYUSD will eat into USDCs market share, stating, “Despite the hype that we’re all about the US, we estimate that 70% of USDC adoption is non-U.S., and some of the fastest-growing areas are emerging and developing markets.”
The spike in redemptions has led to speculation that some crypto holders are looking to convert their stablecoin holdings into PYUSD once the token becomes widely available. The cryptocurrency exchange Huobi has already signaled that it intends to be the first exchange to list the new stablecoin as a way to help “promote the development of the industry.”
But not all cryptocurrency enthusiasts are excited about the new stablecoin, as several crypto sleuths have pointed out that the source code for PYUSD allows PayPal to freeze, seize, or burn the tokens in a user’s wallet.
Crypto Carl, a partner at 6th Man Ventures, pushed back against these concerns, stating, “Of course PYUSD has the ability to ‘freeze & seize’ assets – this is consistent with USDC, BUSD, and even USDT. It’s a core requirement for centralized issuers.” As for why PYUSD is significant, Crypto Carl noted that it is “another step towards legitimizing crypto [as] PayPal is the world’s largest fintech provider and carries incredible brand reputation and user trust.”
“Lastly, they have the right partnerships in place to unlock millions in crypto settlement volume overnight – 29 million merchants and thousands of cross-border payments – one of the few platforms that can begin to solve global payments at scale,” he said. “PayPal’s launch of crypto assets in Sept 2021 was a leading driver of the prior bull cycle – I expect PYUSD will lay critical groundwork for future adoption.”
Crypto analyst Miles Deutscher noted the interesting timeline of developments that led to the PYUSD launch, suggesting that the February crackdown on Binance, Paxos, and Binance USD (BUSD) was all part of the plan leading up to the issuance of PYUSD by PayPal and Paxos.
