8th August 2023 > > PYPL (PayPal stablecoin).

tl;dr

PayPal launching its own stablecoin is another (possibly major) positive development.

Market Snap

Market Wrap

A brief sell-off yesterday afternoon was met with conviction buyers, though I get increasingly concerned by the focus on halving next year. There are too many people looking at history, without acknowledging that the impact of moving from 6.25 BTC per block to 3.125 BTC per block when issuance is already over 92% of the total is immaterial. If there is a price ramp ahead of the halving with no other obvious cause (spot ETF for example) the halving will be a sell the news event.

Curious Cryptos’ Commentary – Huobi

Last night the CCC sent out a potential warning to those who hold crypto assets on Huobi. There doesn’t seem to have been any follow-through today, which is a good thing. Just for the record this was the commentary:

“I have used Huobi for three alts over the years – NAS, ZED, & EVMOS. Fees have always been on the lower than most, and unlike nearly all the competition you don’t end up with small residuals all over the place. Small residuals will irk me for ever more. They are just annoying and get in the way.

I have never left any coins on Huobi, and never will.

It has been reported in Hong Kong that some senior executives of Huobi have been detained by the police. This is never a good situation under Xi and his murderous henchmen, who clearly have plans to steal Hong Kong’s successful crypto industry.

I do hope that this warning by the CCC is baseless, but I said the same when the CCC advised readers to move cryptos off FTX twenty-four hours before withdrawals were suspended.

If you have any of your crypto stash on Huobi, move it to cold storage. And do it now.”

Curious Cryptos’ Commentary – PYUSD (PayPal stablecoin)

Well, this is interesting.

A major move by a major tech firm into the crypto markets. That’s gotta be a good thing, right?

PayPal announced the launch of PYUSD yesterday:

https://newsroom.paypal-corp.com/2023-08-07-PayPal-Launches-U-S-Dollar-Stablecoin

As the press release says “PayPal USD (PYUSD) is fully backed by U.S. dollar deposits, short-term U.S. treasuries and similar cash equivalents, and can be redeemed 1:1 for U.S. dollars.” There is no reason to disbelieve them but for added assurance, from September 2023 PayPal will issue a monthly Reserve Report outlining the instruments in the reserves. This will be combined with an attestation prepared by an independent third-party accounting firm.

I like the fact that it is fully backed by the dollar or similar cash instruments, which contrasts with USDT (Tether) which includes a variety of reserves including BTC, which is frankly a dumb move in this context. We looked at this issue just two days ago. The CCC is always ahead of the game.

PYUSD should put pressure on USDT to adopt a more conservative stance towards its reserves, at least one hopes so. It is certainly a major competitive threat to the hegemony currently enjoyed by USDT.

…

PYUSD is built on the Ethereum blockchain, which has got the ETH maximalists all very excited about what it means for ETH adoption. Which suits me just fine, but I think there is a more interesting point, one that was by @RyanSAdams on X:

“PayPal wouldn't do this without regulatory cover - the US gov clearly wants stablecoins to work.

I think people are massively underestimating the chances the U.S. Gov may flip bullish on stablecoins and choose to pursue a policy of exporting them to the world.”

We already know that the US, Switzerland, and Slovakia are the three countries that have publicly come out against CBDCs. It isn’t hard to imagine a scenario where a USD stablecoin issued by a tech giant with years of history of compliance with the rules, regulations, and the authorities is given US government approval.

And right on cue, Patrick McHenry, Chair of the US House committee on Financial Services released a statement:

https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=408945

I quote:

“… a clear signal that stablecoins – if issued under a clear regulatory framework – hold promise as a pillar of our 21st century payments system.”

Take that gut punch, CBDC supporters.

…

It’s not all good news.

Concerns have been raised that there are centralised aspects to PYUSD that sit uncomfortably with the crypto ethos. Well, yes and no. The centralised and decentralised worlds will live and work with each other. No other crypto is likely to reach the pinnacle of decentralisation achieved by BTC, and that’s ok.

Of more pressing concern is the claim that the coding for PYUSD allows for censorship of transactions. Specifically, the ability to freeze an address, and burn the coins held by that address.

This is no minor aberration, and it worries me. But I also learnt today that the two current largest USD stablecoins by market cap – USDT and USDC – already have this functionality, and that functionality has been used in the past, in response to law enforcement actions. This is a prime example that for most use cases of cryptos, decentralisation is a matter of degree, and is not absolute.

…

For a bit of fun, to cheer us up on another grey August day, I leave you with @CharlieShrem:

“Paypal launching a stablecoin will skyrocket BTC to at least $250,000 faster than it was supposed to, and ETH likely will 10x on a faster timetable. Very exciting.”

Charlie and I would get on very well.