In a recent push towards crypto payments, PayPal launched its first dollar-backed stable coin on Monday, this move has been the latest addition to its crypto services suite and the first for a major US financial institution.
The company’s latest addition, called Paypal USD, has been designed to address the emerging potential to transform payments in the crypto world and digital environments.
Its launch comes as market participants are expecting an imminent vote on a key stablecoin bill from the government, which has just moved to the house along three other crypto bills.
According to the company sources, eligible US PayPal users who buy PayPal USD will be able to transfer the stablecoin between PayPal and other compatible wallets, sending P2P payments using the PayPal USD, converting any of the cryptocurrencies supported by PayPal to and from PYUSD, and checking out after purchases.
PayPal USD is designed to reduce the friction for inexperienced transactions in digital settings and to allow direct flows to developers. Moreover, it is redeemable in USD and is backed by short-term treasuries, dollar deposits and cash equivalents.
The president and CEO of PayPal Dan Schulman said that the “The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the USD”. He further stated that they have committed to a responsible and compliant innovation environment, and will continue to follow the track record of delivering new experiences to their customers, and providing a foundation necessary to the growth of digital wallets.
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What are stablecoins?
Stablecoins are virtual currencies and assets that have their prices pegged with an underlying assets’ value, usually the dollar; However, there are some stablecoins that are pegged to financial assets or commodities.
Though, it is not the first time a large US company has planned to issue its stablecoin. Meta had dropped its plan last year of issuing Diem, its stablecoin, after a backlash from the regulators. payPal, itself had to delay the work on its stablecoin amid regulatory scrutiny, earlier this year as reported by Bloomberg.
PayPal USD is issued by the company which has previously launched the Binance branded stable coin (BUSD). However, the issuing company, Paxos, was instructed by the New York State Department of Financial Services to stop issuing the stable coin in February, which marked the start of fall in the stablecoin’s market cap.
PayPal first introduced its crypto services back in the year 2020 when it allowed users in the U.S. to buy, hold and sell cryptocurrencies. Later, in 2021, PayPal launched the Checkout with Crypto, a service that allowed users to check out at millions of online businesses using crypto. Further, the company gave its users the ability to transfer cryptocurrency from their accounts to other wallets and exchanges, in 2022.
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