Kraken, a prominent cryptocurrency exchange, has announced the inclusion of a new financial instrument to its platform. Starting August 21, Kraken will support trading for PayPal USD (PYUSD), a significant move that encapsulates the melding of traditional and digital financial systems.
The decision by Kraken follows the unveiling of PYUSD by payment giant PayPal, marking another step in the adoption and integration of stablecoins in major exchanges.
PayPal’s Foray into the Stablecoin Realm
On August 7, 2023, in San Jose, California, PayPal (NASDAQ: PYPL) took a significant step in digital finance with the launch of its U.S. dollar-denominated stablecoin, PayPal USD (PYUSD). This digital currency is designed to reshape payments in web3 environments and other digitally native settings.
Features and Functionality
PayPal USD’s design prioritizes the benefits stablecoins bring to payments. Ensured by a 100% backing through U.S. dollar deposits, short-term U.S Treasuries, and similar cash equivalents, this stablecoin promises a 1:1 redemption rate for U.S. dollars. Issued by Paxos Trust Company, it provides the following functionalities:
Transfer PYUSD between their PayPal accounts and compatible external wallets.
Conduct person-to-person payments using PYUSD.
Fund purchases at checkout using PYUSD.
Convert between PayPal-supported cryptocurrencies and PYUSD.
Highlighting the importance of this new asset, PayPal CEO, Dan Schulman, stated, “Our commitment to responsible innovation and compliance, along with our history of pioneering unique experiences for our clientele, is the groundwork for digital payments growth via PayPal USD.”
Stablecoins’ Growing Profitability:
Stablecoins, as underscored by Tether’s impressive Q2 2023 operational profit of over $1 billion, continue to etch a significant and profitable place in the financial domain. PayPal’s entry indicates the vast potential this sector holds.
Blending the Worlds of Fiat and Web3
PayPal USD aims to be more than just another stablecoin. It aspires to be a conduit, connecting the traditional world of fiat to the dynamic realm of web3. Built as an ERC-20 token on the Ethereum blockchain, it is designed to be accessible to a diverse range of developers, web3 apps, wallets, and exchanges.
The coin’s design intends to diminish payment friction in virtual landscapes, expedite transfers, and establish direct financial conduits for developers and creators. Moreover, its integration with the web3 ecosystem ensures its compatibility with platforms like Venmo from day one.
Transparency and Regulation
Ensuring credibility and trust, Paxos Trust Company, under the regulatory eye of the New York State Department of Financial Services, issues the PayPal USD. Furthermore, from September 2023, Paxos will roll out a monthly Reserve Report detailing the reserves underpinning the stablecoin. An independent accounting firm will provide third-party attestation, in line with the guidelines set by the American Institute of Certified Public Accountants (AICPA).
Image source: Shutterstock