PayPal Launches Stablecoin Backed by US Dollar

PayPal has introduced its own stablecoin, called PayPal USD, which is tied to the value of the US dollar. The fintech company assured that the stablecoin is fully supported by US dollar deposits, short-term US Treasuries, and comparable cash equivalents. This move comes almost three years after PayPal initially enabled cryptocurrency support for all US accounts. In January of the previous year, the company confirmed its interest in developing a stablecoin, following the discovery of code and images related to a “PayPal Coin” in its app. At that time, PayPal expressed its willingness to collaborate with relevant regulators when the decision to proceed was made.

In its announcement, PayPal explained that its coin is a token issued by Paxos Trust Company on the Ethereum blockchain, which is subject to regulatory oversight by the New York State Department of Financial Services. In June 2022, the company also received a BitLicense, i.e. a business license for virtual currency operations, from the NYDFS.

Users can buy and sell PayPal USD coins for $1. They can send the coins to other users as payment or use them to buy goods and services by selecting the option at checkout. They can also transfer PayPal USD to compatible external wallets or convert other cryptocurrencies in their account to and from stablecoins.

As Reuters points out, authorities previously blocked attempts by large companies to introduce their own stablecoins. For example, Meta tried to launch a stablecoin for two years, but the project collapsed after repeated delays due to regulators’ concerns that it could be used for money laundering and other nefarious purposes. Ian Katz, CEO of Capital Alpha Partners, told Reuters that PayPal USD could soon get the attention of the Federal Reserve and the Securities and Exchange Commission. For now, PayPal is focused on introducing the new currency and everything people can do with it in the US.