PayPal USD too big to shut down? Why the stablecoin could be different than Meta’s diem

With strong regulatory relationships, an established reputation and history as a guide, PayPal may be better equipped to launch a stablecoin than Meta

article-image

JHVEPhoto/Shutterstock modified by Blockworks

share

As PayPal unveils its stablecoin offering, industry members might recall another time a public company ventured into stablecoins, an effort that eventually proved to be fruitless. 

Meta abandoned its stablecoin dreams — first known as libra, then rebranded to diem — after a Congressional probe, European ban and blacklist from the Federal Reserve and US Treasury Department. PayPal says it will be different.

Its experience with payments and years-long investment in crypto initiatives, plus an already-established relationship with regulators, position PayPal USD for success, the company said in its announcement Monday. 

Read more: PayPal launches stablecoin tied to the US dollar, issued on Ethereum

PayPal USD is a US dollar-backed stablecoin issued by Paxos Trust Company, which is already licensed as a limited purpose trust company under the New York State Department of Financial Services. 

With diem, Meta took the opposite approach, only offering to partner with a Fed-regulated bank — Silvergate — after years of trying to launch the token. Diem founders decided to pursue a US-only approach after the project was banned from operating in Europe just six months after it was announced due to regulators’ concerns with risks to monetary sovereignty. 

Meta stepped away from diem in January 2022 when it sold the project to Silvergate Bank after three years of trying to get on regulators’ good side. Silvergate wrote off the investment a year later, months before the bank closed its doors. 

PayPal was a brief member of the Diem Association, an industry think-tank of sorts designed to advise on the project, before pulling out after about four months. PayPal left the project “to continue to focus on advancing our existing mission and business priorities,” a spokesperson said at the time. 

Aside from a different regulatory attitude toward crypto and a claimed better relationship with the people in charge, PayPal has something Meta never did: It’s an undeniably integral player in the payments-management ecosystem. 

PayPal has a 40% market share of online payment processing, which isn’t going to hurt its case with US regulators, Noelle Acheson, author of Crypto is Macro Now and former head of market insights at Genesis, said.

“[PayPal] is a significant engine of the US payments ecosystem, and it’s hard to imagine regulators scrambling to shut this initiative down as premature when they have so much else going on,” Acheson wrote in Tuesday’s newsletter. 

“Even if that happens, it would escalate the building battle between enterprise and politicians, which in theory should always have some tension, but the debates are becoming ideological with the role of regulation at their root.”


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2023

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Research report - cover graphics (10).jpg

Research

Kinto's novel L2 prioritizes compliance, security, and the user experience.

article-image

Whether you decide to invest in bitcoin should be up to you, not the SEC or Gary Gensler

article-image

Plus, Sanctum’s upcoming airdrop for its new CLOUD token

article-image

The $887 million of net inflows was the category’s second-best total in a single day since their January launches

article-image

The industry-first general purpose zk programmable blockchain charts a fresh course

article-image

Cause of $300 million-plus “unauthorized leak” still unknown as company gets set for big fundraise

article-image

The term DePIN has become a buzzword — and many projects are misusing it to attract attention