PayPal has announced the launch of a new dollar-backed stablecoin, marking the first major U.S. financial firm to create a stablecoin, according to an official statement. This confirms the teaser of the American payments giant in early 2022.
The stablecoin, called PayPal USD ($PYUSD), is an ERC-20 token issued on the Ethereum blockchain by Paxos Trust Co. and will be available from August 7.
In the coming weeks, PayPal customers will be able to buy, send and convert the stablecoin, as well as fund purchases with it. The company has also confirmed that the stablecoin can be transferred between PayPal and “compatible third-party wallets”. At the time of writing, the company has not made it clear which wallets would fall under this category.
PayPal’s foray into the stablecoin market is an important milestone in its ongoing integration of crypto services, which began in early 2021 when the company began offering its users the ability to buy, sell, and hold major digital assets such as Bitcoin and Ether. This move was followed by enabling crypto purchases for Venmo users.
“The shift to digital currencies requires a stable instrument that is both digitally native and easily pegged to fiat currencies such as the US dollar,” said Dan Schulman, president and CEO of PayPal.
He further emphasized the company’s commitment to responsible innovation and compliance, stating that these principles provide the necessary foundation to contribute to the growth of digital payments through PayPal USD.
The new stablecoin will be fully backed by US dollar deposits, US government bonds and similar cash equivalents. The issuer, Paxos Trust Co., is a fully licensed trust company subject to regulatory oversight by the New York State Department of Financial Services (NYDFS).
Last June, PayPal was awarded a BitLicense by NYDFS after previously obtaining a conditional BitLicense.
Starting in September, Paxos will be responsible for publishing a monthly reserve report on the stablecoin, along with an attestation of the value of PayPal USD reserve assets by an independent third-party audit firm.
Paxos CEO Charles Cascarilla hailed the launch of PayPal’s new stablecoin as a “significant leap forward” for digital assets and the financial industry as a whole. seen.
The need for legislation
Shortly after PayPal’s announcement on Monday, House Financial Services Committee Chairman Patrick T. McHenry (RN.C.) stressed the immediate need to pass legislation to regulate stablecoins, pointing to the debut of PayPal USD.
“This announcement is a clear signal that stablecoins – if issued under a clear regulatory framework – hold promise as a pillar of our 21st century payment system,” McHenry said in a statement Monday.
Last month, the committeeClarity for Payment Stablecoins Acta regulatory framework for payments stablecoins, which McHenry said would protect consumers through federal guardrails while preserving the United States’ drive for innovation.
Rep. However, Maxine Waters (D-CA) expressed concern that major tech companies such as Meta and Amazon could potentially issue their own digital currencies under the current bill.
