- PayPal Holdings Inc. is introducing the first stablecoin issued by a major financial company, known as PayPal USD (PYUSD).
- PayPal USD (PYUSD) is being issued by Paxos Trust Co. and is fully backed by U.S. dollar deposits, short-term Treasury bonds, and similar cash equivalents.
- PayPal CEO Dan Schulman aims to reinforce PayPal’s dominance in digital payments by leveraging technology that enables instant and low-cost transfers without a central intermediary.
Payment system giant PayPal is preparing to launch its dollar-pegged PayPal USD (PYUSD) project; PYUSD will be produced by Paxos.
PayPal Launches Stablecoin Project
The payment system giant PayPal is gearing up to launch the dollar-pegged PayPal USD (PYUSD) project, a move that could potentially provide significant support for the slow adoption of digital tokens in payments.
BREAKING: PAYPAL LAUNCHES #CRYPTO STABLECOIN FOR TRANSFERS, PAYMENTS
— CO NEWS (@coinotagen) August 7, 2023
PayPal USD (PYUSD) is being issued by Paxos Trust Co. and is fully backed by U.S. dollar deposits, short-term Treasury bonds, and similar cash equivalents. It is associated with the U.S. dollar and will gradually be introduced to PayPal customers in the U.S. PYUSD will also be launched as an ERC-20 token on the Ethereum network.
PayPal CEO Dan Schulman aims to reinforce PayPal’s dominance in digital payments by leveraging technology that enables instant and low-cost transfers without a central intermediary. With the decline in online payments during the pandemic, PayPal’s shares have dropped by over 35% in the past 12 months, making it one of the sixth-worst performers on the Nasdaq 100 Index. Schulman stated in an interview:
“Over time, the vision is that it will become part of the general payment infrastructure.”
Stablecoins – cryptocurrency tokens tied to an asset like the dollar – have been around for almost a decade but have mostly been used among traders to move digital assets between exchanges and have contributed little to consumer payments. There are approximately $126 billion worth of stablecoins in circulation, with the largest being Tether Holdings Ltd.’s USDT.
The company currently believes that the regulatory environment is “moving toward more clarity” and sees an increased demand for an alternative stablecoin given the market’s density.
PYUSD is designed to be convertible to dollars at all times and can be swapped with other cryptocurrencies on PayPal’s network. It can be used to fund purchases and will soon be available on PayPal’s popular payment app Venmo. Users will eventually be able to transfer token assets between a PayPal and a Venmo wallet. The token can also be moved to compatible third-party wallets outside of the PayPal network.
Low-Cost Instant Transfers
With over 431 million active accounts worldwide, PayPal launched cryptocurrency services in 2020, allowing users to buy, sell, and make payments with a handful of tokens like Bitcoin.
Last week, the company announced it needed to set aside more money to cover worsening loans to traders in the second quarter, causing a 12% daily drop in shares. PayPal has expanded its services offered on various platforms that encompass consumers and traders, including working capital loans and money transfers.
Initially, PayPal envisions that PYUSD will be used in the crypto and web3 sectors, engaging with other digital tokens for transactions and in-game payments, followed by gradual adoption in areas such as money transfers and micro-payments.
Stablecoin proponents have long argued that they offer a superior method for cheap, instant money transfers and payments. However, they have faced challenges from central banks, which are developing their own digital currencies, and speculation about the quality of reserves like USDT.
