PayPal, one of the leading online payment platforms, has announced the introduction of PayPal USD (PYUSD). The in-house stablecoin will be backed by US dollar deposits, short-term US government bonds, and similar cash equivalents.
The launch of PYUSD provides the company with the opportunity to execute seamless transactions and connections between fiat and digital currencies. As the sole stablecoin supported within the PayPal network, PYUSD leverages PayPal's extensive experience in mass payments alongside the speed and programmability of blockchain protocols. With this move, PayPal aims to tap into the potential of stablecoins in the realm of digital payments and Web3 environments. PYUSD operates on the Ethereum blockchain and will be interoperable with DeFi protocols.
PayPal uses BitLicense
In June 2022, PayPal obtained a BitLicense from the New York State Department of Financial Services. This license permits PayPal to engage in virtual currency activities and now offer cryptocurrency services to its US users. It's worth noting that PayPal previously held a conditional BitLicense before it was converted into a full BitLicense. The partnership between PayPal and Paxos Trust Company enables PayPal to offer PYUSD as a stablecoin for payments.
With PayPal USD, eligible US PayPal customers can transfer funds between PayPal and compatible external wallets. Registered customers can make person-to-person payments using PYUSD, fund purchases by selecting PayPal USD at checkout, and convert supported cryptocurrencies to and from PayPal USD. This opens up new avenues for payments within the experience, rapid value transfers, and direct financial flows to developers and creators.
Fully collateralized stablecoin
PayPal USD is issued by Paxos Trust Company, a fully licensed limited-purpose trust company regulated by the New York State Department of Financial Services. The reserves for PYUSD are fully backed by US dollar deposits, US Treasuries, and similar liquid assets. Paxos also manages the reserves of the third-largest stablecoin by market capitalization: Binance USD (BUSD).
The trust company will publish PayPal USD deposits in a monthly reserve report, outlining the composition of reserves. Additionally, an independent auditing firm will issue a public attestation of the value of PYUSD reserves.
Promote digital payments
In addition to its product offering, PayPal aims to enhance consumers' and merchants' understanding of cryptocurrencies, stablecoins, and digital central bank currencies (CBDCs). The company provides educational content to assist users in comprehending the risks and opportunities associated with these technologies. With the introduction of PYUSD, PayPal seeks to bridge the gap between fiat and Web3 environments, enabling fast and secure transactions and contributing to the growth of digital payments.
"The shift to digital currencies requires a stable instrument that is both digitally native and easily connectable to fiat currencies like the US dollar. Our commitment to responsible innovation and compliance, along with our track record of delivering new experiences to our customers, forms the foundation to contribute to the growth of digital payments through PayPal USD." - Dan Schulman, President and CEO of PayPal