Stablecoins Get A New Pal

Dateline: Copenhagen, 20th September 2023.As I am sure you noticed, there was a rather interesting development in the world of digital money with the news that PayPal is issuing its own digital dollar. While many observers are asking what its purpose is, the financial markets liked the news.. Jose Fernandez da Ponte, PayPal’s senior vice president and general manager of blockchain, crypto, and digital currencies is clear about their advantage: “We have always said that our role in crypto and digital currencies is trying to build that conduit between fiat and web3” and they do indeed have potential as an “on ramp” for retail users.Subscribe nowStableThe new PayPal USD is issued by Paxos, which is regulated by the New York State Department of Financial Services (NYDFS), and is redeemable one-to-one for US dollars, the company said. That regulation, rather like the European Electronic Money Institution (ELMI) licence, ensures a 100% reserve in “tier 1” assets, which leads to the rather interesting situation that, as J.P. Koning pointed out, there are now two different kinds of PayPal dollars!On the one hand there are PayPal stablecoin dollars that (because of stringent regulation) are fully backed by the safest sorts of short-term collateral: U.S. Treasury-bills, reverse repo (backed by U.S. government securities) and commercial bank deposits.On the other hand there are PayPal’s regular dollars, which are regulated piecemeal under each U.S. states’ own peculiar version of a money transmitter license and can almost always be legally backed by riskier assets. According to PayPal’s annual report, only…Stablecoins Get A New Pal