The United States has witnessed a gradual discourse on the adoption of cryptocurrencies, and a notable fintech company has emerged as a trailblazer in this arena. In August 2023, PayPal unveiled its groundbreaking move by introducing a stablecoin, the PayPal USD (PYUSD), linked to the US Dollar. This marked a significant milestone as a major US financial institution embraced cryptocurrency assets for the first time.
The creation of PYUSD aimed to transform the landscape of crypto and web3 payments. The announcement generated increased global interest in PayPal’s payment platform, with early indications showcasing a 2% increase in the shares of this fintech giant immediately following the development.
The utility of the payment platform is anticipated to expand, particularly within the online casino industry, where PayPal has been a preferred choice for funding and withdrawals due to its user-friendly interface. Until recently, PayPal exclusively supported fiat and select cryptocurrency transactions. However, the introduction of PYUSD now provides users with the additional option to settle payments in this stablecoin when choosing a PayPal casino.
The growth trajectory of PYUSD is poised to accelerate further as the European Banking Authority (EBA) finalizes regulations in 2024. The EBA has outlined that stablecoins backed by currencies must offer users the option of full redemption of their assets, while stablecoins backed by assets will be redeemed at market prices.
Dan Schulman, President and CEO of PayPal, emphasized the necessity of a stable instrument inherently digital and seamlessly linked to fiat currencies in the transition to digital currencies. He highlighted PayPal’s commitment to responsible innovation, compliance, and a track record of introducing new experiences to customers as the foundation contributing to the growth of digital payments through PYUSD.
PYUSD: Features and Accessibility
According to PayPal, PYUSD facilitates seamless virtual payments sent directly to developers, reflecting a broader trend within the financial services industry seeking to stay at the forefront of innovation. In Spain, for example, PSF, a mobile payment solution, is being integrated as a payment option for League of Legends purchases.
PYUSD offers easy conversion to US dollars and is backed by dollar deposits, cash equivalents, and short-term US Treasuries. Issued by Paxos, PayPal’s brokerage partner for cryptocurrency transactions, PYUSD builds on Paxos’s experience in the stablecoin ecosystem, having previously issued the Binance stablecoin, BUSD.
Since September 2023, Paxos has been regularly publishing monthly reserve reports for PYUSD, providing precise details on the stablecoin’s reserves’ composition. Third-party attestations of the value of these reserves, conducted by a third-party accounting firm in accordance with AICPA standards, further enhance transparency.
Accessible to consumers, merchants, and developers, PYUSD offers a range of functionalities, allowing users to transfer funds between PayPal accounts and external wallets, conduct peer-to-peer payments, make purchases using PYUSD, and convert other supported cryptocurrency assets to and from PYUSD. Despite being the sole stablecoin on PayPal’s network, PYUSD benefits from the platform’s payment processing expertise and blockchain programmability.
As an ERC-20 token, PYUSD caters to a growing community of developers, web3 applications, and external wallets. The increasing adoption of this stablecoin by web3 exchanges is set to enhance the functionality of the PayPal ecosystem, marking a transformative step in the US cryptocurrency landscape.