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PayPal, one of the biggest fintech companies in the world, is rolling out a stablecoin backed by US dollar deposits and Treasury bills, dubbed PayPal USD (PYUSD). The dollar-pegged asset is issued by Paxos, a blockchain infrastructure firm that used to issue BUSD stablecoin.
PYUSD Coming to Venmo
PayPal Holdings is launching PayPal USD – the first stablecoin rolled out by a major financial company. According to the press release, the PYUSD is fully backed by US dollar deposits, short-term Treasuries, and similar cash equivalents.
With the move, PayPal CEO Dan Schulman is looking to reinforce the company’s dominance in digital payments, utilizing the technology that allows instant and low-cost transfers without an intermediary. The company stated that PYUSD is pegged to the US dollar and will become gradually available to more US customers.
“The vision over time is that this becomes a part of the overall payments infrastructure.”
– Schulman told Bloomberg.
The stablecoin will be redeemable for US dollars at any time. It can be exchanged for other cryptocurrencies supported by PayPal, which holds around $1 billion in customers’ crypto funds. Consumers can use PYUSD to make purchases, with PayPal also planning to add the stablecoin to its widely-used payments app Venmo.
The stablecoin will be issued by Paxos, a blockchain infrastructure firm based in New York. Earlier this year, Paxos was ordered by New York financial regulators to stop issuing a stablecoin branded by Binance known as BUSD, citing “several unresolved issues related to Paxos’s oversight of its relationship with Binance.”
PayPal Notes Growing Interest for Alternative Stablecoin as Market Remains Highly Concentrated
PayPal’s stablecoin push underlines the growing interest in these digital assets that offer cheap, instant money transfers and payments. But while the benefits of stablecoins have been known for a while, they have been closely scrutinized by global central banks and regulators.
For example, USDT, the largest stablecoin in the world by market cap, has often been questioned over the quality of its reserves, although the asset has never broken its peg to the US dollar yet.
While stablecoins have been around for nearly a decade, they have largely been used to transfer assets between exchanges. Meanwhile, its use cases in the consumer payments market have seen restricted growth. However, PayPal believes that the regulatory landscape is getting clearer, highlighting the rising demand for alternative stablecoin due to the highly concentrated market.
Editorial Update (7th Aug, 9:30 AM EST): The article has been updated to include more details.
Would more non-crypto popular payments firms follow suit after PayPal’s move? Let us know in the comments below.