Global payments giant PayPal (PYPL) is entering the cryptocurrency market with its own U.S. dollar-pegged stablecoin, PayPal USD (PYUSD), the company announced on Monday.
The Ethereum-based token will soon be available to PayPal users in the U.S. This is the first time a major financial company is issuing its own stablecoin. Users can transfer PYUSD between PayPal and supported external digital wallets, use the tokens to pay for goods and services or convert any of PayPal's supported cryptocurrencies to and from PYUSD.
Read more: What Is a Stablecoin?
PayPal said the stablecoin will be available to an "already large and growing community of external developers, wallets and web3 applications," and can be easily adopted by crypto exchanges.
PYUSD will be issued by New York-based crypto financial-services firm Paxos Trust and will be fully backed by U.S. dollar deposits, short-term Treasuries and similar cash equivalents. It is redeemable for dollars and can also be exchanged for other cryptocurrencies available on PayPal’s network, such as bitcoin (BTC), bitcoin cash (BCH), ether (ETH) and litecoin (LTC).
PayPal paused work on its stablecoin project in February amid regulatory scrutiny, according to Bloomberg.
"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," PayPal CEO Dan Schulman said in the statement. "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."
PYUSD will be first available on PayPal and then on its popular Venmo app.
“This announcement is a clear signal that stablecoins — if issued under a clear regulatory framework — hold promise as a pillar of our 21st century payments system,” Rep. Patrick McHenry (R-North Carolina), chair of the House Financial Services Committee, said in a statement.
One of the worst-performing stocks in the Nasdaq –—down 10% this year despite a major bull market and off 14% last week following a disastrous earnings report — PayPal has managed a 1.6% bounce on the news.
Meanwhile, PayPal said it will provide attested reports of the funds backing the stablecoin in an effort to thwart concerns about unbacked tokens.
"Beginning in September 2023, Paxos will publish a public monthly Reserve Report for PayPal USD that outlines the instruments composing the reserves," PayPal said in its release. "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," it added.
Bloomberg was the first to report about the news.
UPDATE (Aug. 7, 2023, 13:25 UTC): Added details throughout.
CORRECTION (Aug. 7, 2023, 14:05 UTC): Corrects reference to Venmo to say the stablecoin will be available through it later.
UPDATE (Aug. 7, 2023, 14:36 UTC): Added statement from Rep. McHenry.
UPDATE (Aug. 7, 2023, 16:02 UTC): Added stock price movement.
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