Paxos, PayPal’s partner on the project, has called the launch of the PYUSD token a watershed moment in terms of bringing regulation to the crypto space. The US-based company is the issuer of the USDC stablecoin in cooperation with Coinbase, and the difference between PYUSD and its rivals is that it is regulated by the New York Department of Financial Services (NYDFS). According to Walter Hessert, head of strategy at Paxos, this means that anybody who has this token is protected by the oversight and the rules that are set for us by New York.
Hessert explained that a big benefit of this regulation is the removal of bankruptcy risk. If Paxos were to go bankrupt, he said, customers’ assets are protected, including if Paxos were to go bankrupt – a situation we now see with a bunch of companies in crypto. If you can end up sitting in line as a general creditor of a private company that issued you a stablecoin, that’s not as good as a physical dollar.
The launch of PYUSD won’t likely have much impact on Tether, according to its CTO Paolo Ardoino, since it has yet to enter the U.S. market. However, it could become a worthy competitor to USDC, which has seen a steady decline in market cap following the collapse of Silicon Valley Bank (SVB). Like Tether and Circle, reserves for PYUSD will be held in U.S. treasury bills, and the interest earned on those T-bills will be shared between PayPal and Paxos.