Aug 8, 2023

Global payments giant PayPal is launching its own U.S. dollar-pegged stablecoin, PayPal USD (PYUSD).

Video transcript

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. All right. As you already know, we've just been talking about it. Global global payments giant paypal is making a big splash into crypto with its own us dollar pegged stable coin called paypal US. D. The Ethereum based token will be available to paypal users in the United States and is being issued by Paxis Trust Company. Joining us now to discuss this Paxis head of strategy, Walter Hesser, welcome to the show, Walter. Hey Jen. Thanks for having me on. Of course. Thanks for being here now, big news for Paxis and paypal, talk to us about about the partnership and what led up to launching the stable coin. I know that there was a little bit of uh pause on this project earlier this year. Well, XOs uh as you know, is an enterprise platform that's been building Blockchain infrastructure for a lot of the largest companies that are not crypto native companies launching products that are digital asset Blockchain based for their end users. Uh paypal has long been one of our enterprise clients. We launched their Buy hold and sell of crypto with them back in 2020. And uh as you know, yesterday we launched a US dollar backed stable coin, Py US D or paypal US D with them. And this, of course, is a seminal moment for uh really the whole industry uh from our perspective and, and, and even more broadly for financial services and payments. Uh having paypal now enter this market with a trusted stable coin that's bringing a new level of access, a new level of uh potential adoption and certainly a new level of utility into the Blockchain ecosystem. And why does paypal need a staple coin? I think you just heard in our chat there, Emily and I are a little bit bullish on the news, but I think Lawrence might ask why, why does this even need to exist. Paypal seems to be doing fine with the payments infrastructure that they have. Well, I think there's a couple uh ways to answer that. I think on the side of paypal, um uh paypal has been one of the leading payments companies and certainly one of the driving innovators in digital payments over the last 25 years. And so, uh seeing that evolve into leadership in innovation in web three or new types of payments seems very practical and seems like a great place for paypal to be from the Blockchain ecosystem. I think this is a really in incredibly important and positive news because uh staple coins uh I think it's pretty clear are one of the killer use cases of Blockchain. Uh, maybe the most killer use case that we've discovered and adopted yet. And that may be underwhelming to, you know, some gens, for example, and others in the ecosystem. But the reality is, is we want Blockchain products that billions of people are using and, uh, just like email isn't, maybe the most exciting, uh, application of the internet, uh, certainly wouldn't have been if you were imagining what it could be used for. Uh back in the nineties, it is something that we use every single day and is part of our lives. And I think that's what stable point will be. And so you have stable point in the market. Obviously, they're used uh very significantly for crypto trading and D I and you've had incremental improvements in stable coins from tether uh to us DC. And now you have a stable coin that is bringing all new levels of trust awareness, utility into the ecosystem uh along with one of the largest players and innovators and payments. And so I think this is a win for both sides. It's a huge win for paypal and it's a huge win for the Blockchain ecosystem. So, Walter was specifically what, what would people use the paypal stable coin for? Like what would, what if you could just give us a few very specific situations where somebody would use a paypal stable coin? That's not just another stable coin and that's not just paypal like what, what is the specific use case for this? So I think you have very um we all know some of the use cases, uh potential use cases of stable coin. I think the reality is, is that they're being used these ways in very, very low volumes. Um if at all, and that is in kind of like mass remittances, cross-border payments, um in merchant payments, uh consumer payments and settlement. Uh These are all areas where stable coin really presents a lot, lot of value to using uh or versus using current rails or current systems. And you might be able to do them today with uh another stable coin. But now because you have a stable coin that's coming to market, it's fully regulated. Uh so that the underlying reserves are really protected from bankruptcy and it has the backing of a company like paypal uh 20 you're a public company that uh with a brand that hundreds of millions of people already use and trust. Now, we can actually see those use cases come to life because it's being put into products that people are using every day and it's being presented in a way users can trust. So what we're going to see is a lot of the ideas, the areas that people are saying where there's potential for stable coins actually start to come to fruition and we're gonna start seeing mainstream adoption. I believe. So, I just want to follow up quickly on what you just said about how this is fully regulated because you actually said something quite similar to our colleague, Ian Allison in an article and I just want, if you could just tease out how is this fully regulated in a different way than us DC? Because my understanding is that these are both regulated in New York, right? Is this, but the article sort of gives the impression that this is kind of more regulated. Can you just tease that out for us, please? Well, unequivocally is more regulated. And um, you know, you could ask the New York regulator that for example, um the issuance of uh the staple coin in New York, for example, for, you know, US DC is done through a bit license. The issuance of uh Py US D is done by Pao's Trust Company and is done through a trust charter and the way that the issuance happens through Pao's Trust in the case of Ty US D is that the New York banking regulator, the Nydfs has prudential oversight over the issuance of the token, which means that they govern and oversee and approve every aspect of what goes on behind the operation of that stable coin through Pao's Trust company. And that means that no matter where you are in the world, you know that you have the regulatory oversight and the protections of the Nydfs, it's very different than going out and getting mtls um around the US in various states or the equivalent regulation, which is going to effectively give you different uh approvals and oversight with what you do with customers in that market as opposed to potential oversight that are overseeing all of the activities of the underlying product. And so that's the real difference. We could go around and you know, say we have a, a product and get mtls and approval to launch in a whole bunch of different markets or operate it with oversight in those markets. And then you could say it's regulated, but that is very different than prudential oversight. And prudential oversight is what we believe will be the standard in asset back tokens and in us dollar stable points. Ok. So Walter, there was a guy who used to work for paypal, maybe you've heard of him. His name is Elon Musk. Uh So he has this thing now called X dot com, which was a name he wanted to give paypal. Uh, and he wanted to make this, he wants to make it an Everything app. So it's not just uh silly messages from people who hate you, uh anymore, it's just going to be like a, a potentially a way for payments to happen back and forth. Uh Has he talked to XOs about developing a stable coin that would be used on X dot com? I think now that paypal is live, you're gonna see a lot of companies starting to say, hey, maybe we should, you know, think about how stable coins can work for our business. And in fact, I think a lot of them have been thinking that over the past couple of years and there has been a level of political uncertainty and lack of clarity in the market that's made them easy, it made it easy for them to enter. And so the reality is, is all those stable coins are big for us in the digital asset ecosystem. They really haven't uh branched out at all into the broader financial services industry. And so this is really marks that moment and it does it in a very, very big way. Um And so we know that they, well, we've talked, I'll say Pao has talked with a lot of the largest technology and financial services companies about uh stable coins, integrating stable coins, launching white label, stable coins in some cases. And uh we think that there's gonna be a lot of really exciting followers here to paypal. Now, when you, when you uh I mean, anything in the works, first of all right, now, anything in the works other than uh that along those lines with, with a major tech company. How's that? We have other stable coin, other white label, stable coin opportunities in the works. OK. And now with Py US C can I call it s by the way, can you, they're pus I think this is just easier for me to say. So with a lot of different uh pronunciation, I, I heard uh pi UDP, you can, you know, see if that takes off. It has a, you know, like, you know, Star Wars. Um So with uh were you kind of uh did, did you have any issues or any concerns over what happened to Facebook when Facebook wanted to get into this business of stable coins, creating stable coins, DM or whatever, they tried to get 15 different names. Uh It might have had a different structure but it, it had so much, so much pushback, not because it was a stable coin, but because of who was issuing it. Do you think? Are you worried that as you grow this business as time goes on and there might be say, I don't know X dot com or somebody that might be interested in it that you would get regulators say, you know what this is just too much for us to handle. We're not thrilled with this idea of somebody of these everything apps sure that works for wechat, but that's China, that's not a democracy. We're worried about it here. Are you, are you guys concerned that, that you might come up into that regulatory um uh uh wall? Well, I think in, in the case of paypal, you're, we're working with a company that wants to do everything the right way. And so that's why they picked Pao is Pao is regulated infrastructure. We've been a regulated trust company in the digital asset base since 2015. Uh, we've been a large issuer of regulated stable coins. Uh, we've set the standard for prudential oversight and paypal, of course, is a company, uh, that is going to make sure that they're having all of the right conversations and that they're doing this kind of hand in hand with regulators. And so that's how they've approached it. This is a token again, that's fully regulated by nydfs. Uh, they've been in and, um, you know, and both Taos and paypal have uh engaged in really productive conversations with regulators all over. And so, uh, Pao is gonna continue to partner with companies that are willing to uh um really push the boundaries and are able to move the needle on mass adoption of, of a great Blockchain products and, and, and into the digital asset and web through ecosystem. So you keep saying the word regulation and I just want to come back to that because it's a really hot topic right now, right? I mean, generally the sense is that stable coin regulation is non existent in the United States, at least at the federal level, right? That's what all the commotion is about in Washington. Um So I guess you guys kind of found your way around that, you know, you sort of explained by registering by being a trust and registering with New York is, is, is that just kind of what other companies should do or are there still major regulatory obstacles that remain in your opinion for, for stable coins in the United States? We think it's a great path uh in New York as an example of a state regulator has long been seen of not, not, not just as a sufficient but really a gold standard of financial market, infrastructure regulation. Uh Some of the largest asset custodians in the world are New York Trust, the DTC, which has, you know, $90 trillion of stocks and bonds is in New York Trust. And so, uh this is really um as precedent of uh a high standard of financial infrastructure regulation. And so we've pursued this path. We've been in New York Trust since 2015 and we think it's really important for uh federal legislators to act and, and, and bring clarity uh and consistency to the regulation. We have always been a regulation first company. And uh so we are very, very, um encouraging that the, and encouraged that the Staple Queen Act passed through the House Financial Services Committee. We think it's really important that for any legislation uh that uh is passed, that it does continue to provide a path for that state regulated pathway. And we think that's really important and, and uh to your question, do we think that this is a path that other companies can go? A lot of companies have gone this way? Um some of the most important players in the space have followed in the, the, the, the path that we set and become New York Trust coin base bit go. A lot of these companies have become New York Trust. And for stable coin issuers, it's, uh, very available to them. I think that, um, you know, the, the rules are there, there's a precedent set and issuance as a New York Trust is, uh, we think one of the, well, the standard in the market today. All right, Walter, we got to ask, uh I think in my first question to you, I mentioned that this project was put on hold back in February. Coincidentally, that was around the same time that Pao was being investigated by regulators uh for the B US D stable coin. Talk to me about why now is the right time to launch this? Well, I think that you have a, um you know, the industry continues to evolve. I think we have a moment in the stable coin ecosystem specifically where a lot of the players are being shuffled around. Uh The US D has been wind wound down. Uh US DC, I think has lost a lot of um its trust after it de pegged uh back in February, March. And I think that there is um opportunity for players to come in and offer a better, more trusted product. And so for someone like paypal to step in in this market and bring this product to hundreds of millions of customers? I think the timing is great. Does XOs have any regret in getting mixed up with a guy like CZ and Binance? I mean, he basically went out and did his own version of B US D which uh as you, as I mentioned, de pegged uh do any regrets uh business wise that, that it was not worth the, the uh the, the revenue he received by, by getting involved with Binance. I, I, you know, um you, I think that when we did our partnership with Binance, the world was really different. It was, I think 2019 when we uh launched B US D. Uh it was uh the one of the first customers of our white label infrastructure. And I think it was really important and in a lot of ways it was successful, uh We decided to end that partnership uh at XOs uh as we shared publicly. Uh And I think the reason is as Pao has continued to grow with the ecosystem, as the leading infrastructure provider. The, the, the, no, I don't think there was um uh II I think that the, the, the product that we launched uh and the partnership were um appropriate for the time and I think it became time where we became strategically misaligned. Um And so it was the right time to end the partnership. All right, Walter, we are going to have to leave it there. Thanks very much for joining the show this morning. Thanks so much. That was head of strategy Walter. He.

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