PayPal on Monday announced the launch of its own U.S.-dollar backed stablecoin, dubbed PayPal USD (PYUSD), which the financial technology giant says can be used for payments and transfers on its platform.
The new cryptocurrency is issued by Paxos Trust Company and is fully backed by U.S. dollar deposits, short-term U.S. treasuries and similar and can be redeemed 1:1 for U.S. dollars, the company said.
PayPal said starting today with a rollout that will go on for weeks, U.S. PayPal customers who purchase PayPal USD will be able to transfer its new currency between its platform and compatible external wallets, send person-to-person transactions using PYUSD, fund purchases with it at checkout, and convert it to and from any other cryptocurrencies supported on PayPal.
The fintech firm said PYUSD will also be available on its Venmo app, soon.
Crypto expert Brandon Zemp, host of the podcast “BlockHash: Exploring the Blockchain,” says PayPal’s new stablecoin is similar to those already on the market, but the rollout from PayPal gives the company a “massive advantage.”
Zemp pointed to PayPal’s established presence in the financial world with its $84 billion valuation and existing payments infrastructure that dates back to 1998, and says the platform’s move allowing customers the ability to trade crypto, make payments, transfers and cash out directly to their bank accounts is “something that Circle’s USDC, Tether and other financial institutions, don’t quite excel at just yet.”
Stablecoins — crypto tokens whose monetary value is pegged to a stable asset to protect from wild volatility — are great in general, Zemp says. But, he reiterated, it’s better to have the infrastructure around it to make it more impactful.
Prior attempts by major mainstream companies to launch stablecoins have met fierce opposition from financial regulators and policymakers. Meta’s (then Facebook) 2019 plans to launch a stablecoin, Libra, were foiled after regulators raised fears it could upset global financial stability.
Last month, the U.S. House Financial Services Committee also advanced a bill to establish a federal regulatory framework for stablecoins, which will focus on rules for the registration and approval process for stablecoin issuers.
“That is PayPal’s main advantage, and it will further push the envelope on electronic payments, invoicing, remittance, ecommerce and so many other areas,” Zemp told FOX Business. “Don’t be surprised if large cap companies like Amazon, Meta and Google follow suit. With the stablecoin legislation also getting pushed in Congress, we’ll see more companies eager to grab market share.”
Reuters contributed to this report.