Author: Nancy, LianGuaiNews
A new player has entered the stablecoin race. On August 7th, global payment giant LianGuaiyLianGuail announced the launch of LianGuaiyLianGuail USD (PYUSD), a stablecoin pegged to the US dollar, becoming the first major US financial institution to enter the stablecoin market. PYUSD is backed by US dollar deposits and short-term US government bonds, issued by LianGuaixos, and will gradually be made available to LianGuaiyLianGuail US customers in the coming weeks, with plans to soon offer it on the Venmo application.
The launch of PYUSD signifies a “watershed moment” for stablecoin regulation. Compared to other stablecoin projects, PYUSD has the regulatory advantage of being backed by the banking system, providing asset protection in the event of bankruptcy. However, at this stage, PYUSD has more significance in terms of brand appeal within the crypto industry, and there is still a long way to go to break the competitive landscape of the stablecoin market.
Used for transfers and payments, with pause authorization and transfer mechanisms
According to official information, as the only stablecoin supported within the LianGuaiyLianGuail network, PYUSD enables seamless connection between fiat currency and digital currency for consumers, merchants, and developers. As an ERC-20 token issued on the Ethereum blockchain, PYUSD can also be adopted by external developers, wallets, Web3 application communities, and even exchanges, and will be deployed within the LianGuaiyLianGuail ecosystem to enhance the user experience.
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PYUSD will be gradually rolled out in the coming weeks, providing the following features for eligible LianGuaiyLianGuail US users: transferring PYUSD between LianGuaiyLianGuail and compatible external wallets, making person-to-person payments with PYUSD, choosing to use PYUSD at checkout, and converting any crypto supported by LianGuaiyLianGuail to PYUSD.
Similar to other stablecoins, PYUSD is fully backed by US dollar deposits, US government bonds, and similar cash equivalents, which means that user funds can be redeemed 1:1 through LianGuaixos. LianGuaixos, the issuer of PYUSD, is also the issuer of stablecoin BUSD and is a fully licensed limited-purpose trust company regulated by the New York State Department of Financial Services (NYDFS).
Starting from September 2023, LianGuaixos will begin publishing monthly public reserve reports for PYUSD, outlining the specific composition of its reserves. Additionally, third-party audits will be conducted by accounting firms to verify the value of PYUSD reserve assets.
According to the contract address information disclosed by LianGuaixos, as of August 8th, the total supply of PYUSD is 26.9 million tokens, held by 8 addresses. It was initially minted with 1.1 million tokens in November 2022 and has since undergone several small-scale transfer tests.
Although issued on the permissionless Ethereum blockchain, PYUSD has a centralized aspect to its operation. The code repository shows that LianGuaixos has the ability to pause token transfers and approvals in the event of a severe security threat. Furthermore, LianGuaixos must play a role in asset protection and freeze or seize the assets of criminal parties when required by law (including court orders or other legal procedures). It can freeze and unfreeze the PYUSD balance of any address on the chain, as well as erase the balance of an address after it has been frozen, in order to facilitate the confiscation of supporting assets by relevant authorities. LianGuaixos does not carry out freeze operations on its own and it is expected that such situations will be rare. Similar to USDT and USDC, PYUSD also has a blacklist freezing function.
Planned to launch Solana, regulatory agencies secure user assets
LianGuaiyLianGuail’s ambitions for stablecoins have long been known.
As the founding member of Facebook’s stablecoin project Libra Association, LianGuaiyLianGuail was the first institution to announce its withdrawal. According to insiders, LianGuaiyLianGuail made this decision because Facebook did not engage in extensive preliminary work with regulatory agencies and they were concerned about their inability to address global opposition. Ultimately, Libra also sank due to regulatory attacks.
In 2021, LianGuaiyLianGuail began exploring the development of its own stablecoin and communicated with some stablecoin protocol developers in the industry. In January 2022, LianGuaiyLianGuail confirmed its plan to launch a stablecoin, stating, “We are exploring a stablecoin. If we seek to move forward, we will certainly work closely with relevant regulatory agencies, and must clarify regulations, regulatory frameworks, and the types of licenses required in this field.”
However, the path for this stablecoin, which has 430 million users, has not been smooth. According to reports from Wu Shuo, LianGuaiyLianGuail had planned to cooperate with FTX in 2022 to issue PYUSD on Solana, and the two parties had already signed a relevant cooperation agreement. However, it was suspended later due to FTX’s sudden collapse. In addition to FTX’s collapse, PYUSD’s partner LianGuaixos also suspended stablecoin work due to BUSD being investigated and sued. However, based on this cooperation with LianGuaiyLianGuail, it seems that LianGuaixos has resolved the dispute with regulatory authorities.
As one of the most important cryptocurrencies, stablecoins are an important channel for external funds to enter and a safe haven for the volatility in the cryptocurrency field. Even under stricter regulations, competitors continue to emerge. For example, after “losing” BUSD, Binance recently announced support for the new stablecoin project FDUSD.
Walter Hessert, the strategic director of LianGuaixos, revealed that there are significant differences between PYUSD and other competitors, thanks to LianGuaixos’ status as a trust company regulated by NYDFS. This means that if LianGuaixos goes bankrupt, its regulatory agency NYDFS will intervene, and PYUSD will be exempt from bankruptcy. Therefore, users will not unknowingly become creditors in the event of bankruptcy, and funds will be returned to each token holder. LianGuaiyLianGuail also referred to PYUSD as the “world’s safest dollar-backed digital asset.”
However, looking at the current stablecoin track, USDT and USDC are undoubtedly the leading projects and have formed a crushing advantage. So, with LianGuaiyLianGuail’s massive traditional finance user base and strong compliance endorsement, what kind of impact will it have on the stablecoin market? Regarding this, LianGuaiolo Ardoino, the CTO of Tether, believes that LianGuaiyLianGuail’s latest move into the stablecoin market is unlikely to have a significant impact on Tether because Tether has not yet entered the US market. In the market, PYUSD may become a strong competitor to USDC, the latter’s market value has steadily declined after the collapse of Silicon Valley Bank (SVB).
Jeremy Allaire, co-founder of Circle, said, “Although it is widely publicized that our goal is the United States, we estimate that 70% of USDC adoption is outside the United States, and some of the fastest-growing regions are emerging markets and developing markets.”
David Wells, former product manager of USDP and BUSD at LianGuaixos, believes that if PYUSD is launched on cryptocurrency exchanges, it will compete fully with USDC. However, it is currently unclear when/if PYUSD will be listed on major exchanges, so the focus may be on cross-platform payment use cases.
However, due to regulatory compliance, it seems difficult for PYUSD to expand to other chains besides Ethereum, as the U.S. SEC classifies most public chains as securities. This also means that the scale of PYUSD will be difficult to expand in the short term at least. Furthermore, the higher Gas fees on Ethereum will increase users’ transaction costs, thereby affecting the user experience.
LianGuaiyLianGuail’s Entry Accelerates the Mass Adoption of Cryptocurrencies
“The transition to digital currencies requires a stable tool that is both digitized and easy to connect with legal currencies such as the U.S. dollar. Our commitment to responsible innovation and compliance, as well as our track record of providing new experiences for customers, provides the necessary foundation for driving the growth of digital payments through LianGuaiyLianGuail USD.” As stated by Dan Schulman, CEO of LianGuaiyLianGuail.
In addition to developing products and services to increase the utility of digital currencies, LianGuaiyLianGuail is also committed to improving consumer and merchant understanding of cryptocurrencies, stablecoins, and central bank digital currencies (CBDCs), while closely cooperating with regulatory agencies as the industry develops.
Therefore, in the eyes of many industry insiders, LianGuaiyLianGuail’s entry will bring positive and far-reaching impacts. Mark Connors, Director of Research at 3iQ, said that LianGuaiyLianGuail has 431 million users worldwide, and the impact of launching a stablecoin could be similar to BlackRock’s spot Bitcoin ETF, resulting in an immediate impact on the payment system. They are doing this because they want to participate in the next step of financial development.
Varun Kumar, founder of Hashflow, expressed a similar view, stating that LianGuaiyLianGuail’s stablecoin will increase the regular use of cryptocurrencies, rather than speculation, and may encourage other companies to enter the digital asset field. This is a net positive factor for the cryptocurrency industry and another step towards mass adoption. It is expected that in the near future, we will see more large companies taking a similar path.”
Antonio Juliano, CEO of dYdX, believes that LianGuaiyLianGuail providing people with more stablecoin choices from trustworthy companies is overall a good thing. Although USDC and USDT are the leaders in the stablecoin field today, competition will spur better products.
“This is interesting. Another stablecoin has emerged in the United States, which may lead to a decrease in payment revenue primarily supported by Mastercard and Visa, while also helping the industry further develop and promoting sound regulatory policies. Stablecoins (if issued within a clear regulatory framework) are expected to become the cornerstone of our 21st-century payment system, and clear regulations and strong consumer protection are crucial for stablecoins to fully realize their potential.” noted Patrick McHenry, Chairman of the U.S. House Financial Services Committee.
In short, in LianGuaiyLianGuail’s plan, PYUSD will become “part of the entire payment infrastructure”. And how LianGuaiyLianGuail will empower its payment business after opening the gate to compliant encryption, and change the market pattern of stablecoins, remains to be seen.