PayPal Holdings Inc. is rolling out a stablecoin, the first by a large financial company and a potentially significant boost to the sluggish adoption of digital tokens for payments.
PayPal USD (PYUSD) is issued by Paxos Trust Co. and fully backed by U.S. dollar deposits, short-term Treasuries and similar cash equivalents, the San Jose, California-based payments company said on Monday. It’s pegged to the dollar and will be gradually available to PayPal’s customers in the U.S.
With PYUSD, Chief Executive Officer Dan Schulman is seeking to cement PayPal’s dominance in digital payments by leaning on technology that enables instant and lower-cost transfers without a central intermediary. PayPal shares have slumped 33% in the past 12 months, the sixth-worst performer on the Nasdaq 100 Index, as the pandemic-era surge in online payments abated.
“The vision over time is that this becomes a part of the overall payments infrastructure,“ Schulman, who’s preparing to step down in coming months, said in an interview.
Stablecoins — crypto tokens that are pegged to an asset like the dollar — have been around for almost a decade, but they’re mostly used by traders to move digital assets between exchanges and have made limited inroads into consumer payments. There’s roughly $126 billion worth of stablecoins in circulation, according to CoinGecko, the biggest by far being Tether Holdings Ltd.’s USDT.
Some have been controversial: A high-profile attempt by Meta Inc. unraveled last year after an intense regulatory backlash. PayPal itself paused work on PYUSD in February as regulators stepped up scrutiny of cryptocurrencies.
The company now believes the regulatory environment is “progressing toward more clarity” and sees rising demand for an alternative stablecoin because of how concentrated the market is, Jose Fernandez da Ponte, head of PayPal’s blockchain and digital currencies team, said in an interview.
Last month the House Financial Services Committee advanced a bill to regulate crypto stablecoins, which is being championed by Patrick McHenry, a Republican from North Carolina.
McHenry said in a statement on Monday that PYUSD shows that “stablecoins — if issued under a clear regulatory framework — hold promise” for payments systems. “Clear regulations and robust consumer protections are essential to enabling stablecoins to achieve their full potential,” McHenry said.
PayPal’s crypto expansion
PYUSD is designed to be redeemable for dollars at all times and can also be exchanged for other cryptocurrencies available on PayPal’s network. It can be used to fund purchases and will soon be available on PayPal’s popular payments app Venmo. Users will eventually be able to send their token holdings between a PayPal and a Venmo wallet.
The coin can also be moved to compatible third-party wallets outside the PayPal network.
PayPal, which has more than 431 million active accounts globally, first launched cryptocurrency services in 2020. It allows users to buy, sell and make payments in a handful of tokens like Bitcoin through its platform.
“The vision over time is that this becomes a part of the overall payments infrastructure,“ Schulman, who’s preparing to step down in coming months, said in an interview.
Stablecoins — crypto tokens that are pegged to an asset like the dollar — have been around for almost a decade, but they’re mostly used by traders to move digital assets between exchanges and have made limited inroads into consumer payments. There’s roughly $126 billion worth of stablecoins in circulation, according to CoinGecko, the biggest by far being Tether Holdings Ltd.’s USDT.
Some have been controversial: A high-profile attempt by Meta Inc. unraveled last year after an intense regulatory backlash. PayPal itself paused work on PYUSD in February as regulators stepped up scrutiny of cryptocurrencies.
The company now believes the regulatory environment is “progressing toward more clarity” and sees rising demand for an alternative stablecoin because of how concentrated the market is, Jose Fernandez da Ponte, head of PayPal’s blockchain and digital currencies team, said in an interview.
Last month the House Financial Services Committee advanced a bill to regulate crypto stablecoins, which is being championed by Patrick McHenry, a Republican from North Carolina.
McHenry said in a statement on Monday that PYUSD shows that “stablecoins — if issued under a clear regulatory framework — hold promise” for payments systems. “Clear regulations and robust consumer protections are essential to enabling stablecoins to achieve their full potential,” McHenry said.
PayPal’s crypto expansion
PYUSD is designed to be redeemable for dollars at all times and can also be exchanged for other cryptocurrencies available on PayPal’s network. It can be used to fund purchases and will soon be available on PayPal’s popular payments app Venmo. Users will eventually be able to send their token holdings between a PayPal and a Venmo wallet.
The coin can also be moved to compatible third-party wallets outside the PayPal network.
PayPal, which has more than 431 million active accounts globally, first launched cryptocurrency services in 2020. It allows users to buy, sell and make payments in a handful of tokens like Bitcoin through its platform.