PayPal is about to launch its own stablecoin, called entered the world of cryptocurrencies: PayPal USD and PYUSD.
A stablecoin is a form of cryptocurrency designed to maintain stability in its value, typically by being tied to an external resource or entity, such as a traditional currency or commodity. Unlike many other cryptocurrencies, stablecoins try to avoid the large price swings that often characterize digital currencies like bitcoin and ether.
It is the first stablecoin from a major financial company
PayPal’s move represents a breakthrough in the financial sector, as it marks the first time a major financial company has issued its own stablecoin.
Launched on the Ethereum blockchain, PYUSD is initially available to PayPal users in the United States. It will be pegged to the US dollar via a peg relationship.
The stability of the currency is ensured by the trust company Paxos Trust Company, which ensures its support 100% through US Dollar deposits, short-term US Treasury Notes, and other cash equivalents. This makes PYUSD redeemable for dollars for users at any time and provides a solid and stable basis for its valuation.
This is how PYUSD works
PayPal users can use the stablecoin in a variety of ways. You can buy it, transfer it to compatible external digital wallets, convert it to other cryptocurrencies, or use it to make online payments or transfer money to someone else.
Additionally, PayPal anticipates that PYUSD will be available to a wide community of third-party developers, wallets, and Web3 applications, ensuring deeper integration into the already complex cryptocurrency system.
PayPal’s response is well received
The launch of PYUSD marks a significant step for PayPal and the integration, or even adoption, of cryptocurrencies into the traditional financial landscape. The event comes at a time when more and more monetary institutions are showing interest and commitment in this area.
The announcement also had a positive impact on PayPal shares, which rose 1.5% on the Nasdaq.
The statements of the CEO of PayPal
PayPal’s approach to creating its cryptocurrency is very similar to that of Tether, one of the world’s first and most widely used stablecoins, although it was not created by a major financial institution. PYUSD will soon be issued by Paxos Trust, the New York-based cryptocurrency financial services company that will be responsible for guaranteeing the corresponding US dollar deposits.
“The transition to digital currencies requires a stable tool that is digitally native and tightly coupled to a fiat currency like the US dollar,” said Dan Schulman, PayPal’s president and CEO, in a press release. PayPal has a base of 431 million active accounts. “Our commitment to innovation and responsible compliance, as well as our history of bringing new experiences to our customers, is the foundation for the growth of digital payments via PayPal USD.”
The new stablecoin will be available first via PayPal and then via the popular app Venmo in the US.