PayPal launches its own stablecoin backed by U.S. dollar

Online payments giant, Paypal announced on Monday the launch of a U.S. dollar-denominated stablecoin, PayPal USD (PYUSD), to tap into the potential of digital currencies for payments.

A stablecoin is a type of cryptocurrency that is pegged to a fiat currency or other assets to minimize price volatility. PayPal USD is 100% backed by U.S. dollar deposits, short-term U.S Treasuries and similar cash equivalents, and is redeemable 1:1 for U.S. dollars.

PayPal USD is issued by Paxos Trust Company, a regulated entity that also provides custody and compliance services for PayPal’s cryptocurrency offerings.

PayPal said its stablecoin is designed to contribute to the opportunity stablecoins offer for payments and is “both digitally native and easily connected to fiat currency like the U.S. dollar.”

“PayPal USD leverages PayPal’s decades-long experience in payments at scale, combined with the speed, cost and programmability of blockchain protocols,” the company said in a statement.

As an ERC-20 token issued on the Ethereum blockchain, PayPal USD will be available to external developers, wallets and web3 applications, as well as within the PayPal ecosystem.

PayPal said its stablecoin will enable seamless payments in virtual environments, fast transfers of value to support friends and family, remittances or international payments, direct flows to developers and creators, and the expansion into digital assets by the largest brands in the world.

PayPal USD will be available to eligible U.S. customers who purchase it through PayPal. They will be able to transfer it between PayPal and compatible external wallets, send person-to-person payments using PYUSD, fund purchases with PYUSD at checkout, and convert any of PayPal’s supported cryptocurrencies to and from PYUSD.

The company said it plans to make PayPal USD available on Venmo soon.

PayPal also said it will ensure transparency and accountability for its stablecoin by publishing a monthly Reserve Report and a third-party attestation of the value of its reserve assets.

PayPal is one of the first major companies to embrace cryptocurrencies. It started allowing its U.S. customers to buy, sell and hold cryptocurrencies in October 2020, and expanded the service to the UK in August 2021. It also enabled its U.S. customers to use their cryptocurrency holdings to pay at millions of online merchants globally in March 2021.

The company said it has more than 400 million active accounts worldwide and processed $311 billion in payment volume in the second quarter of 2021.