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PayPals new Ethereum-based stablecoin, PYUSD, has been seen as bittersweet news for the crypto community.

While it could finally see Ethereum find its place in mainstream adoption, it could also spell trouble for decentralization and personal control of assets, warns the community.

The new stablecoin, PayPal USD, was launched on Aug. 7 and is issued by Paxos Trust Co. the firm behind Binance USD (BUSD). Its built on Ethereum and designed for digital payments and Web3, with the firm saying it will soon be available to United States customers.

The launch has been seen as a boon for Ethereum adoption. Ethereum bulls Anthony Sassano and Ryan Sean Adams believe the ERC-20 stablecoin will push the blockchain closer toward becoming the money layer of the internet.

The number of daily active users on Ethereum currently hovers between 300,000-400,000, according to Etherscan.

However, Sean Adams noted that 430 million accounts actively use the online payment processor, which means that over 5% of the worlds 8 billion people could theoretically be onboarded onto Ethereum through PayPals new stablecoin.

Martin Koppelmann, the CEO and co-founder of Gnosis, added that by launching PYUSD on Ethereums base layer, Ethereum layer-2s will be able to interact with PYUSD too.

Others, including lawmakers, have seen it as another example of larger institutions embracing crypto, breathing new life into the traditional payments system.

In an Aug. 7 statement, Patrick McHenry, chair of the United States House Committee on Financial Services, said stablecoins like PayPals PYUSD hold promise as a pillar of our 21st century payments system.

However, not everyone is convinced about PayPals new stablecoin.

Several smart contract auditors highlighted that PYUSDs smart contract contains freezefunds and wipefrozenfunds functions, which they claim are textbook examples of centralization attack vectorsin Solidity contracts.

This concern was echoed by cryptocurrency researcher Chris Blec, who believes that PayPal will use the controversial functions where necessary.

Digital asset lawyer Sasha Hodder believes many characteristics of PayPals stablecoin resemble that of a censorship-enabled central bank digital currency. Another smart contract auditor noted that PYUSDs smart contract can be changed by PayPal at any time.

In October, PayPal was slammed for a controversial policy that couldve seen users fined $2,500 for spreading misinformation. The firm later backpedalled, claiming the policy update was published in error.

Related: PayPals crypto holdings increased by 56% in Q1 2023 to nearly $1B

Meanwhile, blockchain engineer Patrick Collins took a slightly more neutral view, suggesting that PayPals PYUSD could have been epic but believes some of the engineering choices were suboptimal such as choosing an outdated version of Solidity to program the contract, making the contract upgradeable and not making it gas efficient.

Sassano also explained in a separate post that while PayPals stablecoin is centralized, Ethereum users are free to choose whether they wish to use it or not.

PayPal said PYUSD will be rolled out within the next few weeks.

ETH is currently priced at $1,825, which is approximately the same price at the time of PayPals announcement about 10 hours ago, according to CoinGecko. Only minor fluctuations have been observed in ETHs price since then.

Magazine: DeFi Dad, Hall of Flame: Ethereum is woefully undervalued but growing more powerful

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PayPal USD: Boon for Ethereum but not decentralization, says community - Cointelegraph