coinnounce.com
Global payment giant PayPal (PYPL) is making its entry into the cryptocurrency landscape with the introduction of its own Ethereum-based stablecoin named PayPal USD (PYUSD). This U.S. dollar-pegged token, issued by Paxos Trust, marks a significant step as a major financial entity issuing its stablecoin.
A Novel Offering in Crypto
The forthcoming PayPal USD (PYUSD) will be accessible to U.S. PayPal users. It becomes the first instance of a prominent financial corporation introducing its stablecoin. Users will have the ability to transact PYUSD between PayPal and compatible external wallets. The stablecoin will be employable for transactions of goods and services, as well as the conversion between other cryptocurrencies supported by PayPal, such as bitcoin (BTC), bitcoin cash (BCH), ether (ETH), and litecoin (LTC).
Backing and Regulation
New York-based Paxos Trust is the issuer of PYUSD, fully backed by U.S. dollar deposits, short-term Treasuries, and equivalent cash assets. This backing structure provides the token with redeemability at all times and permits exchanges for other cryptocurrencies available on PayPal's network.
A Regulatory Consideration
PayPal had initially paused its stablecoin project earlier in the year due to regulatory examination. However, the recent announcement (1) indicates the company's commitment to responsible innovation and compliance, with a focus on fostering digital payment growth through the new stablecoin.
Future Outlook
The PayPal USD (PYUSD) is set to debut on PayPal's platform before being integrated into the Venmo app. The move has been applauded by Rep. Patrick McHenry (R-N.C.), Chair of the House Financial Services Committee, as a positive signal for stablecoins operating under transparent regulatory frameworks.
Ensuring Transparency
To allay concerns about unbacked tokens, Paxos Trust will offer attested reports of the funds supporting PYUSD. Starting September 2023, monthly Reserve Reports for PayPal USD will detail the reserve composition. Additionally, third-party attestations of the value of reserve assets will be published to ensure accountability.
PayPal's venture into the stablecoin realm emerges against the backdrop of the cryptocurrency market's continued growth and its bid to reshape modern payment systems.