PayPal to Issue Dollar-Pegged Crypto Stablecoin Based on Ethereum

Global payments giant PayPal (PYPL) is entering the cryptocurrency market with its own U.S. dollar-pegged stablecoin, PayPal USD (PYUSD), the company announced on Monday.

The Ethereum-based token will soon be available to PayPal users in the U.S. and is the first time a major financial company is issuing its own stablecoin. Users can transfer PYUSD between PayPal and supported external wallets, fund goods and services purchases, or convert any of PayPal’s supported cryptocurrencies to and from PYUSD.

PayPal said the stablecoin will be available to an “already large and growing community of external developers, wallets and web3 applications,” and can be easily adopted by crypto exchanges.

PYUSD is issued by New York-based crypto financial services firm Paxos Trust and fully backed by US dollar deposits, short-term Treasuries and similar cash equivalents. It is redeemable for dollars at all times and can also be exchanged for other cryptocurrencies available on PayPal’s network, such as bitcoin (BTC), bitcoin cash (BCH), ether (ETH) and litecoin (LTC).

“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,” said Dan Schulman, president and CEO of PayPal, in a press statement. “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.”

PYUSD will first be available on PayPal’s popular payments app Venmo.

Meanwhile, PayPal said it would provide attested reports of the funds backing the stablecoin in an effort to thwart concerns about unbacked tokens.

“Beginning in September 2023, Paxos will publish a public monthly Reserve Report for PayPal USD that outlines the instruments composing the reserves,” the firm said in a release. “Paxos will also publish a public third-party attestation of the value of PayPal USD reserve assets.”

“The attestation will be issued by an independent third-party accounting firm and conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants (AICPA),” it added.

Bloomberg was the first to report about the news.

UPDATE (Aug. 7 13:25 UTC): Added details throughout.