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  • Writer's pictureJamal Saafir

PayPal US Dollar-Backed Stablecoin On The Way

PayPal is now throwing its hat in the ring of “digital stablecoins”.

As reported by The Tokenist, PayPal’s new stablecoin or PayPal USD (PYUSD) is a dollar-pegged asset issued by Paxos, a blockchain infrastructure firm that one time issued the BUSD stablecoin for Binance, the world’s largest cryptocurrency exchange.

PayPal Holdings is introducing PayPal USD – the first stablecoin launched 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 this new endeavor, PayPal president and CEO Dan Schulman is seeking to reinforce the company’s dominance in digital payments, using the technology that offers instant and low-cost transfers without an intermediary.

“The vision over time is that this becomes a part of the overall payments infrastructure.”, Schulman told Bloomberg.

The PYUSD stablecoin is redeemable 1:1 for US dollars at any time. It can also be exchanged for other cryptocurrencies supported by PayPal, which custodies around $1 billion in user’s crypto funds. PayPal also stated that PYUSD will progressively become accessible to more US customers.

Starting today and rolling out in the coming weeks, eligible U.S. PayPal customers who purchase PayPal USD will be able to:

  • Transfer PayPal USD between PayPal and compatible external wallets

  • Send person-to-person payments using PYUSD

  • Fund purchases with PayPal USD by selecting it at checkout

  • Convert any of PayPal's supported cryptocurrencies to and from PayPal USD

"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," said Dan Schulman, president and CEO, PayPal. "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."

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.

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.”

As announced by PayPal, "PayPal USD will be available to consumers, merchants and developers to seamlessly connect fiat and digital currencies. 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. As an ERC-20 token issued on the Ethereum blockchain, PayPal USD will be available to an already large and growing community of external developers, wallets and web3 applications, can be easily adopted by exchanges, and will be deployed to power experiences within the PayPal ecosystem.”

“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, enable direct flows to developers and creators, and foster the continued expansion into digital assets by the largest brands in the world. 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.”

“Beginning in September 2023, Paxos will publish a public monthly Reserve Report for PayPal USD that outlines the instruments composing the reserves. Paxos will also publish a public third-party attestation of the value of PayPal USD reserve assets. The attestation will be issued by an independent third-party accounting firm and conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants (AICPA)."

In addition to building products and services that add utility to digital currencies, PayPal is focused on increasing consumer and merchant comprehension of cryptocurrencies, stablecoins and central bank digital currencies (CBDCs), while working closely with regulators as the industry evolves.

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