Payments giant PayPal has launched a US dollar stablecoin, becoming the first major financial technology firm to embrace digital currencies for payments and transfers.
PayPal USD (PYUSD) is fully backed by US dollar deposits, short-term US treasuries and similar cash equivalents, and can be redeemed 1:1 for US dollars.
PayPal’s stablecoin, dubbed PayPal USD, is backed by US dollar deposits and short-term US Treasuries, and will be issued by Paxos Trust. It will gradually be available to PayPal customers in the United States.
“The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the US dollar,” said Dan Schulman, president and CEO, 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.”
The token can be redeemed for US dollars at any time, and can also be used to buy and sell the other cryptocurrencies PayPal offers on its platform, including bitcoin.
PayPal USD is issued by Paxos Trust Company, a fully licensed limited purpose trust company subject to regulatory oversight by the New York State Department of Financial Services.
“PYUSD is the first of its kind, representing the next phase of US dollars on the blockchain,” Paxos posted on messaging platform X, formerly known as Twitter. “This is not just a milestone moment for Paxos & PayPal, but for the entire financial industry.”
Beginning in September 2023, Paxos will publish a public monthly Reserve Report for PayPal USD 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 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).
While stablecoins – crypto tokens whose monetary value is pegged to a stable asset to protect from wild volatility – have been around for years now, they are yet to successfully make headway into the mainstream consumer payments ecosystem.
Instead, consumers mostly use stablecoins as a means to trade other cryptocurrencies, like bitcoin and ether. The world’s largest stablecoin is Tether, followed by USD Coin, which is issued by crypto provider Circle.
Prior attempts by major mainstream companies to launch stablecoins have met fierce opposition from financial regulators and policymakers. Meta’s 2019 plans to launch a stablecoin, Libra, were foiled after regulators raised fears it could upset global financial stability.
A string of major economies, from Britain to the European Union, have since laid out rules to govern stablecoins. The EU’s policies will come into force in June 2024.
