On Monday, PayPal unveiled its forthcoming stablecoin for seamless payments and transfers, introducing PayPal USD (PYUSD). This stablecoin is backed by U.S. dollar deposits, short-term U.S. Treasuries, and similar cash equivalents, all administered by Paxos Trust Company. Initially being rolled out to U.S. customers in a gradual manner, PYUSD offers a host of functionalities.
Qualified U.S. PayPal users who acquire PYUSD can effortlessly move the stablecoin between PayPal and compatible external wallets. They can also execute person-to-person transactions utilizing PYUSD, conveniently finance purchases by opting for PYUSD at the checkout, and seamlessly convert PayPal-supported cryptocurrencies to and from PYUSD. During cryptocurrency transactions, including crypto-based checkouts, PayPal is committed to disclosing the exchange rate and any associated fees.
In an official press release, PayPal underscored the versatility of PayPal USD, aimed at streamlining payments within virtual environments, enabling swift value transfers for familial and friendly support, facilitating remittances and global transactions, fostering direct flows to developers and creators, and promoting the expansion of digital assets by major global brands. The compatibility of PayPal USD with the web3 ecosystem from its inception and its forthcoming availability on Venmo were highlighted.
Operating as an ERC-20 token on the Ethereum blockchain, PYUSD will be accessible to a growing community of external developers, wallets, and web3 applications. Its integration within exchanges and utilization within the PayPal ecosystem is set to empower a wide range of experiences.
A stablecoin, intrinsically tied to an external asset, often the U.S. dollar, is the category to which PayPal's PYUSD belongs. The concept of stablecoins has garnered some controversy, as exemplified by Meta's abandonment of its Diem stablecoin project due to regulatory pushback. Similarly, PayPal had temporarily halted its stablecoin development earlier this year in response to regulatory scrutiny.
PayPal initially ventured into the world of cryptocurrencies in 2020, permitting U.S. users to buy, sell, and hold digital assets. In 2021, the company introduced "Checkout with Crypto," allowing consumers to utilize cryptocurrency for online transactions. Subsequently, PayPal expanded its offerings to include the transfer of cryptocurrencies between accounts and other wallets.
Dan Schulman, PayPal's CEO and President, emphasized the significance of a stable digital instrument interconnected with fiat currencies in the evolving landscape of digital payments.
Notably, PayPal has partnered with Paxos for the issuance of PYUSD, forging a relationship that echoes Paxos' involvement in creating Binance's BUSD stablecoin. However, this partnership was severed in February 2023. The launch of PYUSD was marked by its adoption of the ERC-20 format on the Ethereum blockchain, with the company hinting at further integration of crypto-related services, including wallets and web3 applications.
Amidst these developments, concerns have emerged within the community regarding PayPal's centralized nature. The company's status as a centralized entity has led to instances of payment suspensions, often accompanied by requests for specific information.
In recent market activity, PayPal's shares experienced a 7% decline during extended trading following a quarterly operating margin that fell short of investor expectations. The company's adjusted operating margin for the quarter settled at 21.4%, missing the projected 22%.
It's worth noting that Paxos, the issuer of PYUSD, will commence monthly reports detailing the assets backing the stablecoin, and a public third-party attestation of the value of PYUSD reserve assets will be published.
