PayPal (PYPL) said on Monday that it is entering the cryptocurrency market with its own US dollar-pegged stablecoin, PayPal USD (PYUSD).
PayPal users in the United States will soon be able to purchase the Ethereum-based coin. This is the first time a major financial institution has released its own stablecoin. PYUSD can be transferred between PayPal and compatible external digital wallets, used to pay for products and services, or converted to and from any of PayPal’s supported cryptocurrencies.
PayPal stated that the stablecoin will be accessible to an “already large and growing community of external developers, wallets, and web3 applications,” and that it will be easily adopted by cryptocurrency exchanges.
Paxos Trust, a New York-based crypto financial services corporation, will issue PYUSD, which will be fully backed by US dollar deposits, short-term Treasuries, and comparable cash equivalents. It can be redeemed for dollars and traded for other cryptocurrencies supported by PayPal’s network, including bitcoin (BTC), bitcoin cash (BCH), ether (ETH), and litecoin (LTC).
According to Bloomberg, PayPal halted work on its stablecoin project in February due to regulatory scrutiny.
“The shift toward digital currencies necessitates a stable instrument that is both digitally native and easily linked to fiat currency such as the US dollar,” PayPal CEO Dan Schulman said in a statement. “Our commitment to responsible innovation and compliance, as well as our track record of delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.”
PYUSD will first be offered on PayPal, followed by its famous 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,” said House Financial Services Committee Chair Rep. Patrick McHenry (R-North Carolina) in a statement.
PayPal, one of the Nasdaq’s worst-performing stocks (down 10% this year amid a huge bull market and down 14% last week after a dismal earnings report), has managed a 1.6% rally on the news.
Meanwhile, PayPal has stated that it will offer certified reports of the cash backing the stablecoin in order to alleviate 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 stated in a statement. “In addition, Paxos will make public a third-party attestation of the value of PayPal USD reserve assets.”
“The attestation will be issued by an independent third-party accounting firm and will be conducted in accordance with the attestation standards established by the American Institute of Certified Public Accountants,” it added.
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