PayPal has launched PayPal USD stablecoin. The stablecoin will support payments, and USD deposits, short-term US treasuries, and cash equivalents will fully back it. PayPal USD is redeemable on a 1:1 ratio for USD, and the Paxos Trust Company issues it.
PayPal launches stablecoin on Ethereum
The announcement from PayPal said that the offering will initially roll out in the United States. The customers that purchase the stablecoin can transfer it between PayPal and compatible external wallets.
The stablecoin can also be used to send person-to-person payments using PYUSD. It will also fund purchases by selecting it during checkout. Users can also choose to convert PayPal USD to any of the supported cryptocurrencies by PayPal.
The President and CEO of PayPal, Dan Schulman, said that transitioning towards digital currencies needed a stable asset that was digitally native and easily linked to fiat currencies like the USD.
“Our commitment to responsible innovation and compliance and our track record delivering new experiences to our customers provide the foundation necessary to contribute to the growth of digital payments through PayPal USD,” Schulman said.
Consumers, developers, and merchants will also use PayPal USD to link fiat and digital currencies. PYUSD is the only stablecoin running on the PayPal network, and it leverages the platform’s experience in payments by combining the blockchain protocols’ speed, cost, and programmability.
PYUSD will run on the Ethereum blockchain, making it an ERC-20 token. It will also be available to wallets, external developers, and Web3 applications. The payments platform also said that exchanges could adopt the stablecoin.
The stablecoin also aims to reduce friction for in-experience payments within virtual environments. It will enable the fast transfer of value to friends and family while sending remittances and enabling global payments. The move comes as most current volumes on stablecoins are seen across Web3 environments.
The stablecoin might also serve as a bridge between cryptocurrencies and traditional finance. PayPal noted that the ecosystem will also be available on the Venmo platform, making it easily accessible to many.
PayPal launches stablecoin amid regulatory uncertainty
PayPal has launched this stablecoin at a time when regulatory uncertainty has rocked the cryptocurrency industry. The US Securities and Exchange Commission (SEC) has been cracking down on the cryptocurrency industry.
According to Wu Blockchain, PayPal had initially planned to launch this stablecoin in partnership with FTX. The stablecoin was also originally supposed to run on the Solana blockchain. FTX filed for bankruptcy in November 2022, while the SEC deemed Solana an unregistered security. The developments show that the regulatory gaps in the crypto sector might affect traditional finance.
The stablecoin launch also comes over one year after the collapse of Terra USD. Investors lost millions of dollars following the collapse of this stablecoin, which raises scrutiny into the stability of stablecoins, whose value is pegged to that of fiat currencies.