PayPal has launched a U.S. dollar-denominated stablecoin in a move that the digital payments pioneer says will bridge the gap between fiat and digital currencies and further the transformation of the industry.
Named PayPal USD, the stablecoin is backed by U.S. dollar deposits, short-term U.S. treasuries and similar cash equivalents, making it redeemable one-to-one for U.S. dollars, PayPal said in a statement.
Coinbase, the country's largest crypto exchange, defines a stablecoin as a digital currency pegged to a “stable” reserve asset such as the U.S. dollar or gold – a cryptocurrency without the volatility.
PayPal said its customers are now able to transfer the stablecoin between PayPal and compatible external wallets; quickly send person-to-person payments using PayPal USD; fund purchases with the stablecoin at checkout; and convert any of PayPal’s supported cryptocurrencies to and from PayPal USD.
“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,” PayPal said.
PayPal USD will be issued by Paxos Trust, which is fully licensed and subject to regulatory oversight by the New York State Department of Financial Services.
Third-party review
Beginning in September, Paxos will provide monthly reports detailing the instruments composing the reserves of PayPal USD. Paxos will also publish an independent third-party attestation of the value of PayPal USD reserve assets, PayPal said.
In addition to the stablecoin, PayPal currently offers customers the ability to buy, hold, sell and transfer select cryptocurrencies. The company said it also provides educational content to help accountholders understand the risks and possibilities surrounding the technology.
The launch comes as the federal government grapples with developing a regulatory framework for cryptocurrencies.
“It remains to be seen how PayPal’s stablecoin will be received by the crypto community,” Avi Mash, co-founder of blockchain and web3 consulting firm Block Fuel Group, told Kiplinger.
However, he added, “the big takeaway here is that one of the most prominent web2 payments companies has deepened its commitment to blockchain, and this may help restart conversations about blockchain and web3 initiatives in corporate boardrooms that have been on hold for the last year.”
- GameStop to End Support of Its Crypto Wallet
- Crypto Hackers Stole a Record $3.8 Billion in 2022. Don't Be Next
- What’s Next for Cryptocurrency After the Collapse of FTX?
