Following PayPal’s stablecoin launch in August 2023, the initial market reaction was seemingly muted as compared to other stablecoin data. Tether has remained at the top as the largest stablecoin regardless of recurring questions on the transparency of operations.
Circle remains a preserved stablecoin despite questionable asset management tactics employed through Silicon Valley Bank. It remains a reliable and trustworthy asset supported by regulators and institutional investors.
Meta (formally Facebook) has also shown its attempts to launch a stablecoin but was shut down by United States lawmakers in 2019, but has now focused its efforts on Bitcoin.
Following these headlines, the launch of PYUSD has seemingly been overlooked as the US Securities and Exchange Commission (SEC) proceeds its investigation into PayPal and its stablecoin.
PayPal happenings and the SEC’s obsession with crypto regulation
The SEC has been taking legal actions against financial firms that deal with cryptocurrencies, but the news hasn’t been the main focus. Implications on the news have been the major target with the combination of the court verdict based on the FTX firm legal battle, which has also caused uncertainties in investors. The incident is felt in most areas in the crypto space.
Tech firms dealing with crypto have been the cause of apprehension by policymakers based on the crypto sentiments of the United States Securities and Exchanges Commission. Giant tech gurus are currently making strides into stablecoin in the financial space. Stablecoin transactions have recently surpassed PayPal and Mastercard in volume.
PayPal has been a reliable service provider in financial transactions, and the tech firm has showcased its progress in launching its digital token. This has been recorded as a major milestone for a major financial institution in the United States.
The US policymakers are proceeding with caution following the developed digital dollar, often termed the tokenized dollar, since the Federal Reserve has shown its interest in crypto firms, which has caused negative implications.
The major worry is the private sector beating policymakers based on tokenization efforts. Investors, as well as retail traders, are presented with a clear sign that increased crypto market scrutiny but this has now been a norm.
Events around PayPal
PYUSD stablecoin is expected to be used in the platform’s transactions, but PayPal is not the entity issuing the token. Paxos is the firm that will oversee this launch. The firm is managed by the New York Department of Financial Services.
Currently, the total circulation and issuance of the digital token stands at 159 million. However, it’s notable that action on the adoption of the token has been sluggish.
Paxos operating under the NYDFS combined with PayPal’s BitLicense is still not a sure confirmation for the future success of the financial tech firm. The US SEC already filed a charge against Paxos on allegations of issuing BUSD that is considered an unregistered security by the regulator.
This was followed by the issuance of a Well Notice filing to the Paxos firm. Legal action is still being perused, and the firm has shown its resilience in battling these allegations
Crypto investors still worry that the idea is still beyond reproach based on the takeaway of tech firms linked to stablecoins. Complications and other legal challenges can be expected following the joint ventures in crypto native firms.
However, among the intriguing aspects PayPal stablecoin has is its reserve mechanisms that are in line with the 1:1 ratio that is also pegged to the United States Dollar. This closely reflects the process at Tether.
PYUSD has been able to assuage concerns on issues related to governance following the hot seat Tether is currently showing. This is fostered by PayPal’s reliability and history in the financial market.