Game-changer: PayPal launches a stablecoin 😳; Solid results from around the Block 💸
FinTech is Eating the World, 7 August
Hey Everyone,
Happy Monday! I hope you managed to relax over the weekend because FinTech doesn’t stop 🤯 Today we’re looking at PayPal which just launched a stablecoin (can it be a game-changer & define the future of finance?), and taking a closer look at the solid results from around the Block (all you need to know + a deeper dive into Block, a FinTech giant you cannot ignore). Let’s jump straight into the hot stuff 🌶
PayPal launches a stablecoin 😳
The BIG News 🗞️ Payments giant PayPal PYPL 0.00%↑ has just launched a US dollar-denominated stablecoin, designed for digital payments and Web3 use cases. It’s intended to be compatible with the most widely used exchanges, wallets, and Web3 apps.
This is a kinda big deal, so let’s take a quick look.
More on this 👉 PayPal USD (PYUSD) is fully backed by US dollar deposits, short-term US treasuries, and similar cash equivalents, and can be redeemed 1:1 for US dollars. At least in theory…
Starting today and rolling out in the coming weeks, eligible US PayPal customers who purchase PayPal USD will be able to transfer the token to external wallets, send person-to-person payments, fund purchases at checkouts supported by PayPal, and convert cryptocurrency holdings to and from PayPal USD. Nice.
As an ERC-20 token issued on the Ethereum blockchain, PayPal USD is managed by Paxos Trust Company. To build trust in the token, Paxos will publish a public monthly Reserve Report for PayPal USD that outlines the instruments composing the reserves.
Paxos will also publish a public third-party attestation of the value of PayPal USD reserve assets.
✈️ THE TAKEAWAY
Why PayPal is doing this? 🤔 We can remember that initial reports about PayPal doing a stablecoin came out back in January 2022. Given that the FinTech giant isn’t the fastest company out there, maybe it just had to finish what it started when everyone and their mother was doing stablecoins? 🧐 Now, let’s get more serious.
Given it’s an ERC-20 stablecoin, this means mass interoperability with many other stablecoins and on and off ramps. On top of that, PYUSD will dramatically lower the cost of the settlement to merchants, ensuring faster speed, and a wider deposit base. Given they have Xoom (if it’s not going to be sold…) and Super App ambitions, remittances could be another rational use case as stablecoins are especially useful for people who are not privileged enough to live in a place without harsh inflation and work great for international payments. But more importantly, this could be a massive revenue/profit driver for PayPal. It can leverage the funds in PayPal savings to back its liquidity and earn significantly more. Case in point: Tether - the world’s largest stablecoin issuer - now holds more U.S. treasuries than Australia, the UAE, and Spain. But the crazy part is their operating profit, which was $1 billion+ in the latest quarter 🤯 For the perspective, BlackRock BLK 0.00%↑ (the world's largest asset manager) was in a similar ballpark at $1.6B.
Remember that PayPal has 430M active accounts and ~200M MAU while Venmo has 78M users of its P2P service in the US, so the potential is massive here.
Zooming out, this is a hint that stablecoins can be the core financial infrastructure of the future. According to industry insiders, today's PayPal USD launch is one more data point indicating that tokenized dollars could be a primary means through which dollars move (more on that - soon!). Control the (tokenized) dollars and you will control the future.
Huge win for PayPal.
ICYMI: PayPal Q2 earnings: a blessing in disguise 🤑 [why + a deeper dive into one of the strongest companies in Finance today]