Somehow the cryptocurrency version would theoretically be better in the unlikely event of a PayPal bankruptcy. It's still a bad deal when there are 5% interest rates. Good for PayPal, though,...
PayPal's crypto dollars, which are managed by a third-party called Paxos, are 100% 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. In finance lingo, these assets are known as cash and cash equivalents. A big reason for this conservative investment approach is that Paxos is subject to a set of strict investment limits as determined by its regulator, the New York State Department of Financial Services (NYDFS). You can read about the NYDFS's stablecoin regulatory framework here.
By contrast, PayPal's regular dollars, which are regulated piecemeal under each U.S. states' own peculiar version of a money transmitter license, can almost always be legally backed by riskier assets. (Here is PayPal's list of state-issued licenses.)
Somehow the cryptocurrency version would theoretically be better in the unlikely event of a PayPal bankruptcy. It's still a bad deal when there are 5% interest rates. Good for PayPal, though, since they get the interest.
This is the same business model employed by Circle with USDC as well, which involves providing users with onchain dollars. In return, PayPal and Circle reserve the right to hold the users' USD in...
This is the same business model employed by Circle with USDC as well, which involves providing users with onchain dollars. In return, PayPal and Circle reserve the right to hold the users' USD in short-dated US treasuries, thereby earning the interest.
Unless the user prefers to directly invest in these short-dated treasuries, this seems like good PMF for companies in the programmable money sector.
Somehow the cryptocurrency version would theoretically be better in the unlikely event of a PayPal bankruptcy. It's still a bad deal when there are 5% interest rates. Good for PayPal, though, since they get the interest.
This is the same business model employed by Circle with USDC as well, which involves providing users with onchain dollars. In return, PayPal and Circle reserve the right to hold the users' USD in short-dated US treasuries, thereby earning the interest.
Unless the user prefers to directly invest in these short-dated treasuries, this seems like good PMF for companies in the programmable money sector.
What does "PMF" mean?
Product-Market Fit