AAVE to Integrate Controversial PYUSD, Will this end Privacy in Stablecoins in 2024?

AAVE to Integrate Controversial PYUSD, Will this end Privacy in Stablecoins in 2024?
  • AAVE to integrate PYUSD in its Ethereum pool.
  • To benefit users, traders and businesses.
  • Other Stablecoins have followed PayPal's way of centralization.

The AAVE community has approved the integration of PayPal's PYUSD into its Ethereum Pool. Almost all voters (99.98%) have unanimously voted for the inclusion despite crypto community's strong reaction against PYUSD.

After the launch of PYUSD, it was highly criticized due to PayPal's ability to freeze and wipe wallet addresses.

We tried to investigate if this trend would soon be followed by other stablecoins and will this erase the 100% control of users over their funds.

PayPal's PYUSD Stablecoin
PayPal's PYUSD Stablecoin

AAVE Governance Vote Favors PYUSD Integration

The PayPal's Stablecoin's way into the AAVE Ethereum Pool was cleared by a Governance Vote with 99.98% voters in favour of the integration. With this integration, users will be able to deposit, borrow and stake PYUSD stablecoins into the Ethereum pool whose size as of Jan 11, 2024 is $6.55 billion.

The total size of all AAVE pools is $11.6 Billion. AAVE currently has 8 markets where users can lend, borrow, and stake assets from 15 blockchains.

Why is this Surprising?

The voting patters is a bit surprising because when PYUSD was launched, it was highly criticized for being overly centralized. The extent of centralization was that PayPal could freeze or erase any wallet address that had PYUSD in it.

Though, this is to support anti-money laundering activities. Yet, the mood and decision of agencies have never been 100% rational. We witnessed irrationality in the delay of spot Bitcoin ETFs on the grounds of investor protection despite allowing a much riskier ETF of Bitcoin Futures long back in 2021.

Benefits for Professionals, Traders and Businesses

We will soon witness the following three benefits after the integration of PYUSD with AAVE. Some of these benefits are direct and some of them are indirect.

For Professionals

Those who rely on foreign sources for income or receive payments via PayPal, like many of us. It will give us an opportunity to stake coins and earn additional income. The funds will not just sit in PayPal but will earn us a passive income.

For Traders

Traders will receive an indirect benefit probably a few months later. After the integration of PYUSD with AAVE there will be a need for swap portal too. If AAVE creates such a swap portal, users can readily exchange their PYUSD with any ERC-20 coins and vice versa. This would give them an alternative to exchanges for cashing out.

Traders could also park their funds in AAVE pools.

For Businesses

Businesses will probably be the greatest benefactor of this move. Idle funds in their outward payment accounts could now earn an additional fund which will be significant for them considering the size of their checking accounts.

Further, they can now easily pay anyone around the world with PayPal and the recipient too will have an incentive to use PayPal because of AAVE Pool rewards.

Will Stablecoins Follow PYUSD's Steps? They already have.

Tether's USDT

It seems that all stablecoins have some type of wallet control on the addresses which have their tokens. Tether has frozen suspicious addresses multiple times in the past. The most recent case also involves onboarding of multiple law enforcement agencies on its platform.\

Circle's USDC

The same asset freezing has also been a policy of Circle which issues the USDC stablecoin.

Circle's Asset Freezing Policy
Circle's Asset Freezing Policy

Final Thoughts on Privacy

It appears that most of the stablecoin issuers have traded off control with some concessions from regulatory authorities.

Although regulations exist for the greater prevention of crime and illicit activities, it becomes excessive when authorities misuse this power.

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