Regulated stablecoins backed by the U.S. dollar 💵 have the potential to transform payments globally. In order to address this, PayPal announced the launch of a U.S. dollar-denominated stablecoin called PayPal USD.
PayPal USD is completely backed by the U.S. dollar, short-term U.S. treasuries, and similar cash equivalents 💸. Redeemable in a ratio of 1:1 to the USD, the stablecoin will be issued by Paxos Trust Company, a fully licensed limited-purpose trust which is regulated by the New York State Department of Financial Services.
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Starting next month, Paxos will publish a monthly Reserve Report for PayPal USD, which will be attested by an independent third-party accounting firm. The Reserve Report will be available publicly and will outline instruments backing PayPal USD.
How will this benefit PayPal users?
PayPal processes over $1.3 trillion dollars each year on its platform. Right now, eligible U.S. PayPal customers can purchase the stablecoin to:
- Transfer PayPal USD between PayPal and external wallets
- Facilitate peer-to-peer payments
- Fund purchases with PayPal USD and
- Convert any PayPal-supported cryptocurrencies to PayPal USD and vice versa
PayPal believes the shift towards digital currencies requires a stable instrument that is backed by the USD. The massive user base of PayPal will allow the company to easily gain traction in the stablecoin market while enabling merchants and customers to easily connect fiat and digital currencies.
PayPal USD is the only stablecoin supported by PayPal. Moreover, PayPal USD is an ERC-20 token issued on the Ethereum blockchain and can be easily listed on exchanges such as Binance and Coinbase.
In a nutshell, PayPal USD can be used to reduce friction for payments in virtual environments, send remittances, enable direct flows to developers and creators, and accelerate the expansion into digital assets by the largest brands globally.
However, Congresswoman Maxine Walters released a statement on Wednesday stating she is:
“…deeply concerned that PayPal has chosen to launch its own stablecoin while there is still no Federal framework for regulation, oversight, and enforcement of these assets.”
She further cautioned, “Given PayPal’s size and reach, Federal oversight and enforcement of its stablecoin operations is essential in order to guarantee consumer protections and alleviate financial stability concerns.”
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