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PayPal Confirms its Own Crypto Currency, Backed By the US Dollar

PayPal has been steadily increasing its foray into crypto currency. According to press release in 2020, PayPal suggested that it will enable cryptocurrency as a funding source for digital commerce at its 26 million merchants. The press release also pointed out that PayPal has also been granted a first-of-its-kind conditional Bitlicense by the New York State Department of Financial Services (NYDFS).

 “NYDFS’ approval today follows our June 2020 announcement for a new framework for a conditional Bitlicense to encourage, promote, and assist interested institutions to have a well-regulated way to access the New York virtual currency marketplace in a way that is both timely and protective of New York consumers, through partnerships with New York authorized virtual currency firms,” said Linda A. Lacewell, superintendent, NYDFS. “NYDFS will continue to encourage and support financial service providers to operate, grow, remain and expand in New York and work with innovators to enable them to germinate and test their ideas, for a dynamic and forward looking financial services sector, especially as we work to build New York back better in the midst of this pandemic.”

How will PayPal accomplish this:

PayPal has added  the ability for its users to buy, hold and sell select cryptocurrencies, initially featuring Bitcoin, Ethereum, Bitcoin Cash and Litecoin, directly within the PayPal digital wallet. The company plans to expand the features to Venmo and select international markets in the first half of 2021. The service is enabled in the U.S. through a partnership with Paxos Trust Company, a regulated provider of cryptocurrency products and services.

How is this different than any other provider:

To gain a competitive advantage and mainly alleviate the fluid valuations of crypto, PayPal is exploring it’s own Stablecoin [1].

Jose Fernandez da Ponte, SVP of crypto and digital currencies at PayPal, has confirmed to Bloomberg that the online payment provider is “exploring a stablecoin.” He also said that the company will work closely with relevant regulators “if and when [it] seek[s] to move forward.”

The Bloomberg piece has also identified that a software developer Steve Moser, found hidden code and images for a “PayPal Coin” in the company’s iPhone app. Based on Moser’s discovery, the PayPal Coin will be backed by the US dollar. It may also feature the PayPal logo with two horizontal slashes across it, though that may change upon the coin’s launch, if this were to materialize.

Global trends suggest this strategic move by PaylPal is viable:
Blockchain analytics firm Chainalysis’ 2021 report on global cryptocurrency adoption index, has revelated that, Worldwide Adoption Jumps Over 880% With P2P platforms driving cryptocurrency usage in Emerging Markets.
It’s not a surprise that emerging markets are well ahead in this space. These markets usually face significant currency devaluation, driving residents to buy cryptocurrency in order to preserve their savings. Others use cryptocurrency to carry out international transactions, either for individual remittances or for commercial use cases.
The report also points out that China and the U.S. have seen a dip in the rankings. Both fell from 4th and 6th place on the index respectively, to 13th and 8th. The primary reason both countries dropped is that their rankings in P2P trade volume weighted for internet-using population declined dramatically — China fell from 53rd in this component to 155th, while the U.S. fell from 16th to 109th.

 “The clear takeaway, the report suggests is: Cryptocurrency adoption has skyrocketed in the last twelve months, and the variation in the countries contributing to that show that cryptocurrency is a truly global phenomenon.”

[1] Stablecoins are cryptocurrencies backed by fiat currencies and are considered more stable than their decentralized counterparts.

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