PayPal has broken ground in the stablecoin sector by officially launching its own digital currency pegged to the US dollar.
The financial service has dubbed its stablecoin ‘PayPal USD’ or ‘PYUSD’, and will be primarily used to be exchanged for its fiat currency counterpart, as well as to be used to buy and sell other cryptocurrencies, such as Bitcoin.
PYUSD, like many stablecoins, is backed and pegged to a fiat currency, such as the US dollar, in order to maintain its value and significantly reduce the risk of volatility, often a criticism of many private cryptocurrencies, especially after the several high-profile collapses that occurred in the sector last year.
Other functions PayPal intends PYUSD to be used for include being compatible with other PayPal external wallets, a vehicle for person-to-person transactions and to fund various purchases.
The stablecoin was developed and issued by long-time stablecoin issuer Paxos and will be gradually rolled out to US customers across the country.
Dan Schulman, President and CEO of PayPal, commented: “The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the US dollar.
“Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.”
The launch of PYUSD is not PayPal’s first foray into the world of digital currencies. In December 2022, the financial service brought its crypto service to the European market by launching the offering in Luxembourg, after initially rolling it out in the US two years prior.
PayPal also reported that crypto transactions proved to be popular in its Q1 report last May, revealing that crypto transactions totalled $943m which was viewed as a significant increase from the quarter before.
Whilst stablecoins may not be new to financial and tech firms, with Facebook being the most notable company to launch a stablecoin in the form of Libra, PayPal’s standing in the financial field may prove to be a catalyst for stablecoin mainstream adoption, something it has yet to achieve.
US financial regulators are at odds with crypto exchanges, stablecoins have often been touted as an alternative to cryptocurrencies, due to its non-volatile nature and security alongside a fiat currency.