- PayPal has decided to launch a stablecoin, which would be the first case of its kind for a major financial firm, in what is likely to be a major boost to the slow adoption of digital currencies in the payments space. The San Jose, California-based electronic payments company said that the PayPal token (PYUSD), issued by Paxos Trust, is fully backed by US dollar deposits, short-term Treasury bills and cash equivalents. The currency will be pegged to the dollar, and will gradually be made available to PayPal customers in the United States.
- Stablecoins — cryptocurrency tokens pegged to an asset like the dollar — have been around for nearly a decade, but they're mostly used by traders to transfer digital assets between exchanges, where they've made limited headway in consumer payments. There are nearly $126 billion worth of stablecoins in circulation, according to Coingeco, the largest so far being USDT by Tether Holdings.
Why it matters
PayPal USD is designed to be redeemable in dollars at all times, and exchangeable for other cryptocurrencies available on the PayPal network. It can be used to fund purchases, and will soon be available on PayPal's popular payments app, Venmo. Users will eventually be able to send their tokens between PayPal and Venmo Wallet. The currency can also be transferred to compatible external wallets outside the PayPal network. PayPal, which has more than 431 million active accounts globally.
