Ethereum is facing a severe downturn, having been dismissed at the $2000 level last month. Today’s Ethereum price is $1,830.89, with a current market cap of $220 billion; Ethereum has a circulating supply of 120.16 million (this is the total available amount). Short-term exponential moving average values are expected to move below the three-month threshold, regarded as a bearish signal.
PayPal’s stablecoin will likely reinforce Ethereum’s strengths. The financial technology company that offers payment services to individuals and businesses is on the verge of launching a stablecoin backed by the US dollar called PayPalUSD (PYUSD), which can be bought or sold on its app or website. PayPal became the first FinTech company to welcome digital currencies for payments and transfers.
The Reaction from The Crypto Community Has Been Mostly Positive
The crypto community has applauded PayPal’s initiative, believing it will be beneficial for the broader industry. According to PayPal, the PYUSD stablecoin makes it possible for customers to buy, sell, hold, and transfer the newly created virtual currency. Even if stablecoins have been around for some time now, they haven’t managed to become widely accepted or normalized as payment systems. Consumers mostly deploy stablecoins to trade Bitcoin or Ethereum.
Former attempts to launch stablecoins have encountered hostility from financial regulators and policymakers. For example, Meta sought to launch a permissioned blockchain-based stablecoin, Libra, yet it generated backlash from government regulators in the EU, US, and other countries.
The stablecoin is an ERC-20 token issued on the Ethereum network, so there are concerns about the gas fees associated with using the protocol. Ethereum gas fees are usually steeper compared to other networks on account of the complexity of the blockchain.
Some go as far as to say that this is an example of a big company trying to take advantage of a trend to make more revenue. What is certain is that it’s bad timing on PayPal’s part, given the uncertainty in the US with excessive focus on robust regulation. Uncertainty about government policies causes people to lose their confidence.
Launched On Ethereum, The Dollar-Pegged Stablecoin Could Reinforce Ethereum’s Position as The Internet’s Financial Layer
Issued by Paxos, PYUSD will become part of the overall payment infrastructure. It will be backed by short-term treasuries, dollar deposits, and cash equivalents. PayPal’s stablecoin is built on the Ethereum network as an ERC-20 token, following a standardized set of rules and guidelines.
Anthony Sassano, one of the most renowned Ethereum educators and the founder of The Daily Gwei, affirms that Ethereum is making slow but definite progress in becoming a global settlement layer for all kinds of value.
Simply put, PayPal’s stablecoin could reinforce Ethereum’s position as the Internet’s financial layer. Crypto investor and entrepreneur Ryan Sean Adams points out the fact that PayPal has 430 million active accounts.
For Internet users to directly trade with geographically distinct neighbors, one vital component is missing – a financial layer to store, exchange, and measure value without the need to use a legacy financial institution. Over the years, many attempts have been made to create digital money, but none have been successful.
In 2008, Satoshi Nakamoto posted about the Bitcoin project, revealing he’d developed an open-source, peer-to-peer cash system. The main goal of Ethereum wasn’t to establish itself as an alternative monetary system but to streamline and monetize the operations of smart contracts, decentralized applications, and other blockchain solutions.
In today’s world of changing customer expectations, the finance industry has come up short as regards evolution. Digital natives bring unique preferences, so legacy companies must adjust their business towards a younger, digitally inclined demographic.
Ethereum owns the financial layer of the Internet, driving embedded experiences; it has gone beyond a simple cryptocurrency. Ethereum is the application layer on which all sorts of marketplaces are built. It’s disrupting money and the Internet.
PayPal will take advantage of Ethereum’s speed, cost, and programmability. PYUSD will become available to an established community of external developers, wallets, and Web3 applications, being easily adopted by exchanges.
Stablecoins Hold the Promise as A Pillar of the 21st-Century Payment System
As the name clearly suggests, stablecoins are designed to have a relatively stable price, so they’re backed by a currency. PYUSD’s value is tied to that of the US dollar, so those who will accept it will retain purchasing power, at least in the short term.
Many cryptocurrency adherents are of the opinion that the future belongs to stablecoins Patrick McHenry, a member of the US House, recently declared that if PayPal’s stablecoin is issued under a regulatory framework, it can meaningfully expand the payment system for the digital age. At any rate, the development is a step in the right direction for the broader cryptocurrency industry.
To address the risks to users of stablecoins, legislation could require centralized issuers to fulfill risk management standards. More exactly, stablecoin issuers might have to hold reserve assets and become subject to assessments or audits.
At present, there’s no universal regulatory framework for stablecoins, which means that the regulatory landscape is marked with uncertainty. Nonetheless, stablecoins as a technology has triumphed, especially in the banking sector, serving as a breakthrough innovation in the future of payments. Stablecoins aren’t always stable, as demonstrated by the collapse of Tether, which has shaken up the supposed model of safety.
Wrapping It Up
PayPal’s stablecoin is the first of its kind, living natively on the Internet and running on one of the world’s most advanced blockchains. It’s not just a turning point for the FinTech company but also for the entire financial industry.
A lot of criticism has been advanced by smart contract auditors who call attention to the fact that PYUSD accommodates functions that make possible freezing or reversing transactions. According to Anthony Sassano, there’s no reason to worry even if freezing and unfreezing funds in holders’ accounts is very common with PayPal’s operating practices. PayPal didn’t respond to any request for comments.
For the time being, the use cases for the new stablecoin seem to be limited to crypto-related and Web3 applications. PayPal puts its faith in the future when digital currencies become mainstream, and businesses accept stablecoin payments via merchant solutions.
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