Kraken, a prominent cryptocurrency exchange, has announced the inclusion of a new financial instrument on its platform. Starting August 21, Kraken will support trading for PayPal USD (PYUSD), a major step that includes the merging of traditional and digital financial systems.
Kraken’s decision follows payments giant PayPal’s unveiling of PYUSD, marking another step in the adoption and integration of stablecoins across major exchanges.
PayPal’s foray into the Stablecoin realm
On August 7, 2023, PayPal (NASDAQ: PYPL) in San Jose, California, took a major step into digital finance with the launch of its US dollar-denominated stablecoin, PayPal USD (PYUSD). This digital currency is designed to reimagine payments in web3 environments and other digitally native settings.
Features and functionality
The design of PayPal USD prioritizes the benefits that stablecoins provide for payments. Backed by 100% backing from US dollar deposits, short-term US Treasury bonds and similar cash equivalents, this stablecoin promises a 1:1 redemption rate for US dollars. Published by Paxos Trust Company, it offers the following functionalities:
Transfer PYUSD between their PayPal accounts and compatible third-party wallets.
Make personal payments with PYUSD.
Fund purchases at checkout with PYUSD.
Convert between PayPal supported cryptocurrencies and PYUSD.
Dan Schulman, CEO of PayPal, emphasized the importance of this new asset, stating: “Our commitment to responsible innovation and compliance, along with our history of pioneering unique experiences for our customers, is driving the growth of digital payments through PayPal USD. .”
The Growing Profitability of Stablecoins:
Stablecoins, as underscored by Tether’s impressive Q2 2023 operating profit of over $1 billion, continue to hold an important and profitable place in the financial realm. The entry of PayPal indicates the enormous potential of this sector.
Mixing the worlds of Fiat and Web3
PayPal USD wants to be more than just another stablecoin. It aspires to be a channel that connects the traditional world of fiat with the dynamic realm of web3. Built as an ERC-20 token on the Ethereum blockchain, it is designed to be accessible to a wide variety of developers, web3 apps, wallets and exchanges.
The coin’s design aims to reduce payment friction in virtual landscapes, speed up transfers, and establish direct financial channels for developers and creators. Plus, its integration with the web3 ecosystem makes it compatible with platforms like Venmo from day one.
Transparency and regulation
To ensure credibility and trust, Paxos Trust Company, under the supervision of the New York State Department of Financial Services, issues the PayPal USD. Additionally, starting September 2023, Paxos will roll out a monthly reserve report detailing the reserves underlying the stablecoin. An independent accounting firm will provide a third party statement in accordance with the guidelines of the American Institute of Certified Public Accountants (AICPA).
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