PayPal (NASDAQ:PYPL), a top publicly traded Fintech, has announced the launch of a dollar-based stablecoin.
According to a company statement, PayPal USD or PYUSD is a fully backed digital asset that holds cash, short-term US Treasuries, and similar assets issued in partnership with Paxos, a regulated Trust company that holds a BitLicense in New York.
Eligible PayPal users may access the stablecoin immediately to accomplish the following:
- Transfer PYUSD from PayPal to external wallets
- Send peer-to-peer payments
- Use PYUSD to purchase items
- Convert dollars to any supported cryptocurrencies
Currently, PayPal supports Bitcoin, Bitcoin Cash, Ethereum and Litecoin. PayPal has added a page on its website to provide answers for consumers.
Dan Schulman, CEO of PayPal, said that the shift to digital currencies requires a stable instrument.
“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 is issued using the Ethereum blockchain as an ERC-20 digital asset. PayPal says the stablecoin is designed to “reduce friction” for payments and transfers. PYUSD will also be available “soon” on Venmo – part of PayPal.
Importantly, in September 2023, Paxos will start to publish a public monthly Reserve Report for PayPal USD that outlines the instruments composing the reserves. This report will include a third-party attestation in accordance with standards as outlined by the American Institute of Certified Public Accountants (AICPA). Paxos is also providing custody for the service.
Representative Patrick McHenry, Chair of the House Financial Services Committee, which recently approved stablecoin legislation, said that clear regulations with stablecoins can create value for users.
“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 McHenry.
The Representative added that robust consumer protections are essential for stablecoins achieving their full potential.
“The bipartisan Clarity for Payment Stablecoins Act recognizes the strong role that states have played in regulating digital asset firms and builds on successful state regimes, like New York’s. We are currently at a crossroads to keep America at the forefront of digital asset innovation. Congress is making significant, bipartisan progress on legislation to ensure the U.S. leads the financial system of the future. We must finish the job.”
McHenry and supporters are also pursuing a broader regulatory framework for digital assets but it is not clear if it has sufficient support in Congress to make it to the President’s desk.