The Glaring Problem With PayPal’s Stablecoin

By Vince • August 8, 2023 11:44 am • Comments

ProCoin News recently reported that PayPal unveiled its new stablecoin PYUSD.

On Monday, PayPal announced: “Today, we’re unveiling a new stablecoin, PayPal USD (PYUSD). It’s designed for payments and is backed by highly liquid and secure assets. Starting today and rolling out in the next few weeks, you’ll be able to buy, sell, hold and transfer PYUSD.”

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The broader crypto community responded to the recent development with mixed reactions, though very many were negative and could be characterized as mistrustful of the payment giant’s entrance into crypto.

Today we learned that PayPal’s newly unveiled stablecoin suffers from a host of glaring security concerns. …

According to sources, the most pressing concern is that PYUSD contains backdoor capabilities for PayPal employees to freeze and wipe clean individual user accounts through a two-step process.

 

Bitcoin Culture highlights this concerning feature of PYUSD and sounded the alarm:

“𝐏𝐚𝐲𝐩𝐚𝐥 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐤𝐧𝐨𝐰𝐧 𝐭𝐨 𝐫𝐚𝐧𝐝𝐨𝐦𝐥𝐲 𝐟𝐫𝐞𝐞𝐳𝐞 𝐚𝐜𝐜𝐨𝐮𝐧𝐭𝐬 𝐚𝐧𝐝 𝐡𝐨𝐥𝐝 𝐩𝐞𝐨𝐩𝐥𝐞’𝐬 𝐦𝐨𝐧𝐞𝐲 𝐡𝐨𝐬𝐭𝐚𝐠𝐞…𝐢𝐭’𝐬 𝐚𝐥𝐥 𝐨𝐯𝐞𝐫 𝐭𝐡𝐞 𝐢𝐧𝐭𝐞𝐫𝐧𝐞𝐭. Their newly launched Paypal USD stablecoin features a built-in “asset protection” function which can erase your balance in 2 transactions: 1.) 𝐟𝐫𝐞𝐞𝐳𝐞, 2.) 𝐰𝐢𝐩𝐞𝐅𝐫𝐨𝐳𝐞𝐧𝐀𝐝𝐝𝐫𝐞𝐬𝐬. In smart contract security it’s called a centralization attack vector. Yeah it might be “adoption” but it ain’t Bitcoin…not your keys not your crypto.”

 

 

Finbold reports:

Crypto enthusiasts and specialists are also assuming a critical position in this new PayPal endeavor. Sasha Hodder, founder of Hodder Law Firm, lists a few other centralization attack vectors that she was able to find in the project’s terms and conditions:

-Full KYC
-Custody by Paxos
-Tied to your PayPal login
-PayPal can reverse any transaction
-Claimed to be fully backed by actual USD.

Coin Bureau writes, “So, it is now confirmed that PayPal’s stablecoin can be frozen. And, it is known that PayPal has a history of limiting / restricting accounts based on political views. It’s still good news, but don’t be deluded.”

 

Patrick Collins pointed out some other problems with the newly announced stablecoin: “The PayPal stablecoin could have been epic, but it feels rushed. Old solc version, upgradable contract, not gas efficient. We knew it would be centralized so that’s ok. But worst of all, they named it “PyUSD” and didn’t use Python or Vyper”

 

CoinDesk explained:

The latest stablecoin pegged to the U.S. dollar — will be an Ethereum-based token offered to the company’s online-payments customers before expanding to PayPal’s Venmo app. PayPal has allowed customers to buy and sell cryptocurrencies including bitcoin (BTC) and ether (ETH) on Venmo since April 2021, but it was only in May 2023 that it enabled the ability to transfer any crypto to third-party wallets.

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