PayPal launches first major U.S. dollar-backed stablecoin

PayPal has introduced its own stablecoin, PayPal USD (PYUSD), which can be used for transactions and transfers. Backed by U.S. dollar deposits and similar cash equivalents, PYUSD marks the first move of its kind from a major U.S. financial institution. Users can make payments, transfer funds, and convert between other supported cryptocurrencies and PYUSD.

Introduction of PYUSD:

PayPal announced the launch of its own stablecoin, PYUSD, issued by Paxos Trust Company and backed by U.S. dollar deposits, short-term U.S Treasuries, and similar cash equivalents.

This move is a first for a major U.S. financial institution and the coin will initially be rolled out to U.S. customers.

Usages of PYUSD:

Customers purchasing PYUSD can use it for person-to-person payments, fund purchases, and convert between PYUSD and other supported cryptocurrencies.

The company plans to use PYUSD to reduce payment friction in virtual environments, facilitate fast transfers, and encourage further expansion into digital assets.

Stablecoin Controversies:

Stablecoins, such as PYUSD, are cryptocurrencies tied to an external asset like the U.S. dollar and have been subjects of controversy.

For instance, Meta abandoned its own stablecoin plan due to regulatory backlash, and PayPal previously halted its stablecoin work amid scrutiny of cryptocurrency.

PayPal's History with Cryptocurrency:

PayPal first began allowing U.S. users to buy, hold, and sell cryptocurrencies in 2020.

In 2021, it introduced the Checkout with Crypto feature, which let users transact at online businesses using cryptocurrency, and began allowing cryptocurrency transfers to other wallets and exchanges.

Statements from PayPal:

PayPal CEO Dan Schulman stated that digital currencies require a stable, digitally native instrument that is easily connected to fiat currency, like PYUSD.

Paxos will publish monthly reports detailing the assets backing PYUSD to ensure transparency.

PayPal's Financial Situation:

PayPal's shares fell 7% in extended trading last Wednesday due to a lower-than-expected quarterly operating margin.

The company reported an adjusted operating margin of 21.4%, missing the forecasted 22%.