PayPal has introduced a groundbreaking digital currency, a stablecoin backed by the U.S. dollar, marking a significant move within the realm of cryptocurrencies. This pioneering step makes PayPal the first major U.S. financial institution to venture into this space.
The stablecoin, or PayPal USD (PYUSD), was meticulously crafted to revolutionize payments within Web3 and digitally native environments. Its creation comes when the cryptocurrency landscape is poised for transformation, as evidenced by the recent advancement of a crucial stablecoin bill in Congress. This bill and three other crypto-related bills have moved to the House for deliberation, further highlighting the increasing attention in this arena.
Designed to streamline seamless payments within virtual settings, the PayPal stablecoin eliminates transaction hurdles and enables direct transfers to developers. It is a redeemable asset underpinned by actual dollar deposits, short-term U.S. Treasurys, and similar liquid assets.
In expressing his views on this development, Dan Schulman, PayPal’s President, and CEO, emphasized the necessity for a stable digital instrument that seamlessly integrates with fiat currencies like the U.S. dollar. He underscored PayPal’s commitment to innovation and compliance, emphasizing how their track record of delivering innovative experiences to customers positioned them to foster digital payment growth through PayPal USD.
Today, we’re unveiling a new stablecoin, PayPal USD (PYUSD). It’s designed for payments and is backed by highly liquid and secure assets. Starting today and rolling out in the next few weeks, you’ll be able to buy, sell, hold and transfer PYUSD. Learn more https://t.co/53RRBhmNHx pic.twitter.com/53ur2KmjU7
— PayPal (@PayPal) August 7, 2023
The news of this innovative step had a tangible impact on the market, with PayPal’s shares witnessing a more than 2% surge following the announcement.
Notably, the issuance of the PayPal stablecoin is orchestrated by Paxos, a well-established player in the stablecoin sector. Paxos, also acting as PayPal’s brokerage partner for crypto transactions, has previously been associated with issuing the Binance-branded stablecoin BUSD. However, Paxos encountered regulatory constraints earlier this year when the New York State Department of Financial Services instructed it to cease BUSD issuance, contributing to a decline in the stablecoin market cap.
Stablecoins, which tie their value to underlying assets, typically fiat currencies like the U.S. dollar, play a pivotal role in crypto trading. These assets offer lower volatility than many other cryptocurrencies, providing traders with efficient avenues to enter and exit positions swiftly. Despite their stability, stablecoins have yet to be immune to regulatory scrutiny, as evidenced by recent actions in the crypto market.
Incorporating the concept of a dollar-backed stablecoin into its suite of services represents PayPal’s bold stride into the evolving landscape of digital currencies.