PayPal has released the PYUSD stablecoin on the Ethereum blockchain. What are PayPal's plans for PYUSD and how do they plan to use it?
Over the past four years, we have been active in the cryptocurrency space. PayPal's main goal has always been to bridge the world of fiat currencies and Web3 technology, creating payment systems for everyday use. We are a payments company and payment apps are very important to us. The introduction of PYUSD is a natural continuation of our work. From using traditional crypto tokens in the app, we've moved into blockchain transfers, gone global, and now provide a regulated storage tool that can also be used for payments. This is the first step on our path. We believe that stablecoins are currently the best application of blockchain, and they are directly related to the payments market, which we are very interested in.
< p> How do you see its application? For example, what industries do you think will use it? Maybe it will be related to decentralized finance (DeFi)? Or is it just a tool for regular payments?
The basic ideas behind cryptocurrencies are great for facilitating payments. They have a number of advantages, such as lower transaction fees and faster confirmation of transactions. For me personally, the speed of confirmation is especially important.
When it comes to cryptocurrencies, we often talk about the fact that they allow you to make transfers faster and at lower costs. But when we apply this to payments, speed equals savings. It is important to recognize the benefits of fast transaction processing. However, this takes time. It will be several years before stablecoins become widely used for everyday payments. But there are already industries where stablecoins are finding their application. They are widely used in cryptocurrency transactions and in the Web3 world. PYUSD will also find its use in these areas. We see use cases, for example, in international money transfers, which is one of our areas of focus.
We acquired Xoom a few years ago, which was active in international money transfers. This gave us experience and the opportunity to influence this area. Now there is a merger of money transfers and cryptocurrencies. In the business payments space, we are seeing an increase in the use of stables. Let's imagine that you run a company that ships goods abroad. It would be very important for you to receive payments instantly instead of waiting 3-5 days for a bank transfer to process.
Another important direction for stablecoins will be the digital goods market. Games like Minecraft and Roblox generate nearly $100 billion in transactions each year. Currently, developers who sell in-game items through traditional payment systems can wait up to 15 days to receive their money.
It will still be several years before stablecoins become widely used domestically for e-commerce or retail sales, but there is already a large sector of business that can use them.
Do you mean that DeFi will develop further?
I think DeFi will be part of the first wave of change in the financial industry. Currently, PYUSD is only available in PayPal wallet. We plan to expand its use and it is safe to say that the main cryptocurrency trading platforms will begin to provide the ability to work with PYUSD. When this happens, people will be able to use PYUSD for traditional financial transactions as well.
There was news that said that PYUSD can be sent to "compatible external wallets" and there are certain regulations that may prohibit transactions with your own wallets. I would like to clarify whether this still applies to your own wallets?
Yes, indeed it is. Regarding compatibility, I can say that PYUSD is an ERC-20 token deployed on the Ethereum blockchain. This means that it can be sent to external wallets that support ERC-20 tokens. This is what we mean by “compatibility.”
The user terms set out some rules according to which PayPal can cancel the deal. However, I assume that this only applies to certain types of transactions, such as those carried out within the PayPal/Venmo system.
There are indeed several types of transactions that involve the use of fully backed and regulated stablecoins. Our PYUSD issuance has been approved by the New York City Department of Finance (NYDFS) and Paxos is the issuer. In this context, New York has strict and clear requirements for customer verification (KYC) and anti-money laundering procedures, which requires us to implement appropriate controls.
There are several popular stablecoins such as USDT and USDC. How do you plan to differentiate PYUSD?
There are several factors that make PYUSD stand out from its competitors. First of all, this is due to the huge PayPal ecosystem. PYUSD is the only stablecoin accepted through PayPal. This applies not only to current PayPal, but also to Venmo in the future, as well as our expanded network of partners. Millions of consumers and businesses will have access to PYUSD and can use it to conduct transactions through PayPal.
Imagine that you have some PYUSD and you decide to make a purchase from one of the millions of merchants that accept PayPal. You will be able to use your PYUSD to pay for this purchase. This is a very unique opportunity that only a few can provide. Having PYUSD in your wallet makes it convenient and easy to transact within the vast PayPal ecosystem.
The second point relates to the close connection with fiat currency and our long-standing banking partnerships. The process of converting a regular currency into a stable currency is not easy: it may require sending funds to the platform with additional fees and then waiting for a withdrawal, which can take days. In the case of PYUSD, you can convert it, sell it and withdraw the funds to your bank account instantly. This process turns out to be much more convenient for both depositing and withdrawing funds.
The third important point concerns compliance with laws and regulations. PYUSD is issued through the New York Trust and is based on our experience of over 20 years in combating financial crime in the online environment.
Speaking of regulation, the stablecoin bill recently passed the preliminary stage in the House of Representatives. So, is the timing of the launch of PYUSD accidental?
We have been following the legislative regulation process for a long time. Different parties still have differing opinions on the content of the bills, and this is normal for the democratic process. The passage of these laws was not a key factor in our decision to launch.
We are now seeing a clear trend towards clearer regulation of stablecoins. A few months ago, the MiCA initiative was introduced in Europe. Many markets have already implemented strict regulations for stablecoins, and the United States is also actively involved in this process. This is why we chose New York, as it currently has the most stringent, powerful and well-developed regulatory framework for stablecoins.
Representative Maxine Waters raised concerns about PayPal's decision to issue its own stablecoin without federal regulation, oversight, or enforcement. How do you view this statement, and how do you plan to respond?
Her main argument is that she advocates for federal regulation of stablecoins. As we just discussed, this is indeed a topic of discussion in Congress. It's also worth noting that there are other representatives in Congress, both Republican and Democratic, with different points of view on this issue. This is a natural part of the law-making process. We support the idea of regulation through legislative measures. As I previously noted, we have one of the most stringent regulatory systems in place to date, and we stand ready to comply with and follow any legislation that Congress passes.
Does PayPal believe federal regulation is necessary or does it believe that state regulation of stablecoins is sufficient?
We are a payments company, and payment transactions are carried out in this country are subject to regulation at the state level. I think different regions have different regulatory methods. For example, in the case of MiCA, it has a clear definition for payment-related stablecoins. In our view, if a stablecoin is associated with payment transactions, its inclusion in the payment structure makes sense, given that payments are currently regulated at the state level.
Several years ago, Meta introduced the Libra project, attempting to create a stablecoin that was not directly tied to the value of the dollar. However, I am wondering how the failure of this project, largely caused by regulation, affected PayPal's strategy when launching its stablecoin?
I am confident that it did not affect our current strategy. Our approach to growth in this area is similar to how we approach other aspects of our business. We operate as a technology company as well as a financial institution that has operated in a highly regulated environment for 20 years. Our approach always includes a high level of regulation. Sometimes this means that our pace of development may be slower than that of other companies. We place great importance on compliance and interaction with regulators. We provide services in 200 countries, making us one of the few organizations with such a global presence. When exploring new directions, we will work closely and coordinate our steps with regulators. Therefore, I believe that it is not so much the influence of the Libra project, but rather our approach embedded in our corporate culture.
< b>How do you plan to promote it in other regions? Are you planning to release a stablecoin pegged to other fiat currencies?
We have already made our stablecoin available for use in the PayPal wallet, and the next step will be to extend this functionality to the Venmo wallet. This process will initially be limited to the United States, but we are considering expanding our activities outside the country in the future. At this time, our efforts are focused on ensuring successful implementation within the United States.
As for the issue of creating a stablecoin pegged to other world currencies, we are not yet considering such an idea.
< hr style="height: 4px; width: 4px;">You probably already have a general idea of whether there are plans to issue stablecoins linked to the euro or pounds sterling in the future.
There are no such plans at the moment.
What will your upcoming monthly reserve report, and will it include evidence of reserves?
The issuer of the token is Paxos. One of the requirements is regular inspection and auditing. This is similar to how other stablecoins are issued, such as USDP, also issued by Paxos. Users will be able to view the audit report, which will be conducted by an independent party. This report will display the amount and composition of reserve funds.
However, this does not imply the ability to identify addresses, and users cannot use certain functions to confirm that their coins are still in reserves.
In my opinion, the best way for all interested parties is to visit the Paxos website . There are reports on other stablecoins and you can clearly see the information we provide.
PayPal is committed to create a presence in digital environments such as virtual games. This is a little different from PayPal's existing audience. How do you plan to attract these users?
I have always been interested in the payments area in the video game industry. Perhaps, watching from the outside, many people think that games are only for young people. In fact, the audience for electronic games is very diverse. This is a huge industry with high computing power requirements and strict limitations.
Many innovations are born in the world of video games. I believe that a lot of innovation in payments will also come through video games. We are looking at scenarios that are currently not implemented, but stablecoins could make them possible, such as streaming payments. Consider paying for video viewing not for all the content, but for every second or minute. Or imagine purchasing digital goods within a gaming environment that you can take with you. We've already seen experiments including NPCs or AI in games that can connect to a wallet, carry value and then trade it within the game environment.
We can't just present it all - what we're doing is releasing a platform product that developers can build on top of.
The process of creating ideas is one thing, but their implementation is another. We don't just think, we provide a platform for developers to put these concepts into practice.
Exactly this was one of the reasons why PayPal decided to create PYUSD as an ERC-20 token. It sounds like there are plans to introduce smart contracts and other features that give money more flexibility.
When we started working on this project, we had a choice whether to go down the usage route open licenses and standard unlicensed development tools, or create your own unique solution. However, we quickly decided to go the open route because we believe it is important to follow developer requests.
Regarding the choice of Ethereum, this was a reasonable step. Ethereum already has an active developer community that supports and develops the platform. Our stablecoin PYUSD was created with omnichannel in mind, which means we aim to expand its use to other blockchains or even to other layers within the same network. While Ethereum may have higher fees compared to other blockchains, it also provides a number of unique benefits and features.
This provides a new source of income for PayPal. First of all, PayPal can make money from deposits like government bonds. The question is, will fees be 1.5% of deposits or transactions?
Historically, the mechanism for monetizing stablecoins has been through reserve earnings, and in the current low interest rate environment this has become a significant source of profit for the industry. We believe that this should not be the only way to monetize. The interest rate environment may change, so our vision is that with the rise of stablecoins, we will use tools closer to traditional payment businesses for monetization.
Additionally, users can convert one currency's stablecoin to another currency's stablecoin, which may require a fee. Regarding the issue of fees, buying PYUSD from PayPal is free, and there are no fees when selling PYUSD. You can buy 1 dollar for 1 dollar without any additional cost, it is also possible to sell 1 dollar and your PayPal balance will receive 1 dollar, of course, transfers can also be made and we do not charge any PayPal fees for these transfers. The only fee you will need to pay is the fee provided by the Ethereum protocol. The PayPal ecosystem does charge transaction fees, but there are no fees for stables.
Returning to the previous question about PayPal's revenue sources, what is the potential of this business model from PayPal's perspective?
In the long term, this business model could be very significant, but our expectations for next year are quite moderate. The existence of stablecoins is justified, right? There is already about $120 billion in stablecoins in the market, and we hope to take our share of this market. In addition, we are also committed to promoting the expansion of the entire market.
A few days ago we saw an analytical report that predicted that the volume of stablecoins will grow from the current $122 billion to $28 trillion in five years. This is an impressive increase, representing a 22-fold increase in five years. Our goal is to create the right use cases and gradually expand them. Growth will definitely happen, but we are approaching this from a position of long-term strategic planning, as this is a long-term process that will take several years to fully develop.
How will the app present this payment method to users? Will it be listed among all available payment methods, or are there any incentives to encourage people to try it?
It will be visible in two different places. The first place is when you log into the application. There will be a separate section for cryptocurrencies inside the application, where you will be able to see the new token as an additional payment option. You will also see a list of tokens that we support, including Bitcoin, Ethereum, Litecoin, Bitcoin Cash and of course PYUSD. Here you will be able to buy, sell and send PYUSD, as well as transfer it to external wallets.
In the second case, when making a purchase, we will give users a choice. There are no preset options and no instructions to use any specific payment method. Therefore, the PYUSD payment option will appear as another payment option, but will not have higher priority at checkout. For example, if you choose to use PayPal and pay with a credit card, your credit card will be displayed first and other options, including PYUSD, will be presented after it.
Is there anything else regarding PYUSD that you would like to mention?
As I mentioned earlier, we truly believe that stablecoins have huge potential in this area. Their advantages in terms of payment time, cost savings and speed of transactions are indeed very important. However, before they become widespread in regular payments, it will take time for them to be accepted by society.
When it comes to competition, I am confident that we will be able to gain some market share in this area. At the same time, I also believe that there is significant demand for stablecoins in the market. It would be beneficial for the entire crypto industry to have more stablecoins that are fully compliant with all standards and regulations.
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