You may have questions about the new PayPal stablecoin. Like, why does it exist, gckaloudis asks in The Node newsletter. Opinion.
But PayPal is rolling PYUSD out in the United States through Venmo. Venmo only works in the United States and requires a bank account to use. PYUSD use in Venmo is basically just another new way for banked Americans to transact with some digital representation of the U.S. dollar, which is basically how all PayPal products have operated since founding.That said, PYUSD will purportedly be able to be sent outside of PayPal’s walled garden over the Ethereum network.
In reality, PayPal would probably just not allow that , but if getting frozen funds out of PayPal develops as a genuine use case for PYUSD then the benefit of the virtuous cycle of an oppressive banking system will accrue to PayPal . Realistically, the use cases and benefits of PYUSD won’t apply to the consumer at all and will instead become some sort of wonky bank-end thing for financial institutions to exploit and use.PayPal and Venmo make money as payment processors, but PYUSD lives in stablecoin land and we knowdifferently. Stablecoin issuers hold interest-bearing instruments with customer funds and give none of the yield to their customers. The issuer takes the spread.
And with PayPal explicitly saying it will hold T-bills, the PYUSD move is in the end unsurprising with our 20/20 hindsight. Here’s a way to make money, so let’s make some money.Here’s the big open question that I don’t have an answer for. Assuming PYUSD will be as popular as the hype around it suggests, Circle and Tether are in for some healthy competition.
From Circle’s perspective, a bigger company is coming for its crown as the “regulated” stablecoin and from Tether’s perspective a bigger company is coming for its crown as “the” stablecoin. Of course, the hype around PYUSD needs to be met with actual demand for this to change anything. That remains to be seen.As for a “digital dollar,” a hypothetical Federal Reserve issued central bank digital currency , here comes yet another dent against the retail version of the CBDC. Why would the U.S.
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