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(Kitco News) - Digital payments provider PayPal has announced the launch of a U.S.-dollar-denominated stablecoin as the firm looks to deepen its involvement with blockchain technology and upgrade its payments infrastructure.
“Fully-backed, regulated stablecoins have the potential to transform payments in web3 and digitally native environments,” PayPal said in a press release. “To address that emerging potential, PayPal announced the launch of a U.S. dollar-denominated stablecoin, PayPal USD (PYUSD).”
The new stablecoin, which is issued by stablecoin provider Paxos Trust Company, is fully backed by U.S. dollar deposits, short-term U.S Treasuries and similar cash equivalents, PayPal said. The firm was issued a BitLicense by the New York State Department of Financial Services (NYDFS) in June, which enabled them to issue the stablecoin in partnership with Paxos.
Access to PYUSD began rolling out to U.S. customers on Monday, and the stablecoin can be used to send person-to-person payments, fund purchases, convert any of PayPal’s supported cryptocurrencies to and from PYUSD, and users can transfer the stablecoin between PayPal and compatible external wallets.
“The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar,” said Dan Schulman, president and CEO of PayPal. “Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.”
PYUSD is an ERC20 token issued on the Ethereum blockchain and will allow PayPal customers, merchants and developers to “seamlessly connect fiat and digital currencies,” the company said.
“As the only stablecoin supported within the PayPal network, PayPal USD leverages PayPal's decades-long experience in payments at scale, combined with the speed, cost and programmability of blockchain protocols,” they said. “PayPal USD will be available to an already large and growing community of external developers, wallets and web3 applications, can be easily adopted by exchanges, and will be deployed to power experiences within the PayPal ecosystem.”
The stablecoin, which will also be added to Venmo, is designed to “reduce friction for in-experience payments in virtual environments, facilitate fast transfers of value to support friends and family, send remittances or conduct international payments, enable direct flows to developers and creators, and foster the continued expansion into digital assets by the largest brands in the world,” PayPal said.
PayPal and Venmo users will be able to buy or sell PYUSD through the platforms at a rate of $1.00 per token. Starting in September, a monthly Reserve Report will be published that outlines the instruments composing the reserves.
“Paxos will also publish a public third-party attestation of the value of PayPal USD reserve assets,” the release said. “The attestation will be issued by an independent third-party accounting firm and conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants (AICPA).”
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The release of its own stablecoin is part of PayPal’s goal of introducing more users to blockchain technology and helping them gain more familiarity with transacting in digital assets.
“PayPal is focused on increasing consumer and merchant comprehension of cryptocurrencies, stablecoins and central bank digital currencies (CBDCs), while working closely with regulators as the industry evolves,” the company said. “In addition to offering PayPal USD for U.S. accountholders, PayPal currently offers customers the ability to buy, hold, sell and transfer select cryptocurrencies, and provides educational content to help accountholders understand the risks and possibilities surrounding the technology.”
PayPal first began offering access to cryptocurrencies on Oct. 21, 2020, allowing users to buy, hold, and sell Bitcoin (BTC), Ether (ETH), Bitcoin Cash (BCH), and Litecoin (LTC). In March 2021, the company expanded its cryptocurrency offerings to include Checkout with Crypto, which allows users to pay for goods and services with their cryptocurrency holdings at select merchants.
In June 2022, PayPal further expanded its cryptocurrency offerings by allowing users to transfer, send, and receive cryptocurrency between PayPal and other wallets and exchanges. As of August, PayPal users in the U.S., the U.K., Canada, Australia, and Singapore can buy, sell, hold, transfer, send, and receive the four supported tokens, and the company plans to expand its cryptocurrency offerings to other countries in the future.
