PayPal stablecoin will be backed by the U.S. dollar, short-term U.S. treasuries, and other cash equivalents.
Digital payments giant PayPal has launched its own stablecoin. The coin will be backed by the US dollar, short term US treasuries, and other cash equivalents.
PayPal launches stablecoin
PayPal announced on Monday that it launched its own USD-pegged stablecoin, named PayPal USD (or PYUSD), which will be used for payments and transfers on their platform.
The ERC-20 coin will be issued by Paxos Trust Company. The roll out will begin this week and will go on for the next few weeks. US customers who buy PYUSD will be able to make P2P transactions, make purchases with, and convert to other cryptocurrencies.
“The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar,” commented Dan Schulman, president and CEO, PayPal. “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.”
Beginning in September 2023, Paxos will release a monthly Reserve Report for PayPal USD as well as a public third-party verification of the reserve assets’ worth.
Regulatory tussle on stablecoins
This is an interesting development as other major fintech companies attempt to launch a stablecoin has been met with opposition by regulators.
A plan to create a federal regulatory framework for stablecoins, with a particular emphasis on guidelines for the registration and licensing process for stablecoin issuers, was also advanced last month by the US House Financial Services committee.
A few days after the Republican-led House Financial Services Committee approved legislation to regulate stablecoins at the end of July, Paypal announced the launch of a stablecoin. Democrats oppose this measure because it will allow stablecoins to be issued by companies like PayPal.
Democrats also object to the bill’s failure to provide the Federal Reserve any genuine enforcement power over issuers that hold state licenses.
House Financial Services Committee Chairman Patrick McHenry saying this in a statement, quote, “clear regulations and robust consumer protections are essential to enabling stablecoins to achieve their full potential. That’s why it’s more important than ever that Congress enact legislation to provide comprehensive digital asset regulation, especially for stablecoins.”
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