PayPal has become the first major U.S. fintech firm to launch its own cryptocurrency with a stablecoin called PayPal USD. Issued by Paxos Trust Company, PayPal USD is 100 percent backed by dollar deposits, U.S. treasuries and cash equivalents, and will maintain a value of exactly $1, according to the company. Initially available only to U.S. customers, CEO Dan Schulman says PayPal intends to make cryptocurrency a part of its overall payments infrastructure and will soon integrate it with its Venmo mobile payment app. PayPal shares, in a slump since last year, were up 3 percent on the news.

PayPal USD (PYUSD) will be “the only stablecoin supported within the PayPal network,” and the idea is for it to “reduce friction” between digital and fiat currencies, seamlessly connecting the two and offering consumers, merchants and developers the opportunity to avail themselves of the speed, cost-efficiencies and programmability of blockchain protocols for payments at scale, the company explained in a press release.

Beginning this week, eligible U.S. PayPal customers who purchase PayPal USD will be able to:

• Transfer PayPal USD between PayPal and compatible external wallets.
• Send person-to-person payments using PYUSD.
• Fund purchases with PayPal USD by selecting it at checkout.
• Convert any of PayPal’s supported cryptocurrencies to and from PayPal USD.

“According to the company, users can buy, sell, keep or transfer the stablecoin directly on its mobile app or by using its website and can send it as payment on PayPal to friends without incurring any fees,” according to Forbes.

As an ERC-20 token issued on the Ethereum blockchain, PayPal USD will be available to external developers, wallets and Web3 applications. “PayPal users can also convert PayPal USD to other cryptocurrencies on the site and can send PayPal USD to digital wallet addresses through the cryptocurrency Ethereum,” Forbes reports.

PayPal, which has 435 million global users, becomes the first major online payment firm to enter the $120 billion stablecoin market, according to Forbes.

“The company is entering an extremely crowded market already dominated by stablecoins like Tether and USDC, at a time when the hype over cryptocurrency has largely fizzled,” CNBC reports.

Related:
Credit Card, PayPal or Cash App? How You Pay Matters, The Wall Street Journal, 8/8/23
This Is a Reminder That You’re Probably Oversharing on Venmo, The New York Times, 8/9/23
Why PayPal’s Stablecoin Scares Washington and Could Shake Legislative Talks, CoinDesk, 8/10/23