PayPal has launched a new U.S. dollar-denominated stablecoin, PayPal USD, which it says has the potential to transform payments in web3 and digitally native environments.
The company announced that the stablecoin, which is fully backed by U.S. dollar deposits, short-term U.S. treasuries and similar cash equivalents, is now being rolled out to eligible U.S. PayPal customers. PayPal USD can be redeemed 1:1 for U.S. dollars and is issued by Paxos Trust Company.
Those who purchase the currency can transfer funds between PayPal and compatible external wallets, send person-to-person payments using PYUSD, fund purchases by selecting PayPal USD at checkout and convert any of PayPal’s supported cryptocurrencies to and from PayPal USD
On the announcement, Dan Schulman, president and CEO, PayPal said: “The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar. Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.”
Connecting Fiat and Web3
The move is seen as a way to connect fiat and digital currencies for consumers merchants and developers. It will be made available to an already large community of external developers, wallets and web3 applications as an ERC-20 token issued on the Ethereumblockchain.
PayPal USD is designed to reduce friction for in-experience payments in virtual environments, facilitate fast transfers of value to support friends and family, send remittances or conduct international payments. Most of the current volume of stablecoins is used in web3-specific environments. PayPal USD will be compatible with that ecosystem from day one and will soon be available on Venmo, the company said.
What makes it fully regulated?
PayPal USD is issued by Paxos Trust Company, a fully licensed limited purpose trust company subject to regulatory oversight by the New York State Department of Financial Services.
In June 2022, PayPal was issued a BitLicense by NYDFS after previously obtaining a conditional BitLicense. Reserves for PayPal USD are fully backed by U.S. dollar deposits, U.S. Treasuries and similar cash equivalents while PayPal USD can be bought or sold through PayPal at a rate of $1.00 per PayPal USD.
Beginning in September 2023, Paxos will publish a public monthly Reserve Report for PayPal USD that outlines the instruments composing the reserves. It will also publish a public third-party attestation of the value of PayPal USD reserve assets.
In addition to offering PayPal USD for U.S. accountholders, PayPal currently offers customers the ability to buy, hold, sell and transfer select cryptocurrencies as well as educational content to help accountholders understand the risks and possibilities surrounding the technology.
