At a time when the industry is going through some complicated times, to say the least, a new cryptocurrency stablecoin is going to be launched by a major player in the financial tech sector.
On Monday, PayPal announced that it would be launching a stablecoin of its own backed by the U.S. dollar. Called PayPal USD, or PYUSD for short, the stablecoin will be available for use for transfers and payments on the financial giant’s platform.
Paxos Trust Company will issue the cryptocurrency. The company also said that PYUSD will be backed completely by deposits of the U.S. dollar, as well as similar deposits such as short-term U.S. treasuries. It will be able to be redeemed for U.S. dollars on a one-to-one exchange basis.
The rollout of the new crypto coin will start this week and last a few weeks. Any customer of PayPal within the U.S. who purchases PYUSD will have the ability to transfer the currency between external wallets that are compatible as well as on the PayPal platform.
It can also be used to pay for purchases at online checkouts, sent to other people on the platform, as well as converted to and from any of the other cryptocurrencies that PayPal supports.
In the near future, PYUSD will be available on the Venmo app, which is owned by PayPal.
Brandon Zemp, a podcast host who’s considered an expert in the crypto industry, said that this new stablecoin will be similar to many others that are already available. The big difference that will give it a “massive advantage” over competitors is the rollout that PayPal is giving it.
PayPal is a long-established company in the fintech sector and the financial world as a whole. It has been around since 1998 and currently has a valuation of $84 billion.
Zemp highlighted the fact that PayPal’s new stablecoin will allow customers to make payments, trade crypto, conduct transfers and cash out money directly to their own banks accounts, which is “something that Circle’s USDC, Tether and other financial institutions don’t quite excel at just yet.”
As Zemp explained while talking to Fox Business recently:
“That is PayPal’s main advantage, and it will further push the envelope on electronic payments, invoicing, remittance, ecommerce and so many other areas. Don’t be surprised if large cap companies like Amazon, Meta and Google follow suit.
“With the stablecoin legislation also getting pushed in Congress, we’ll see more companies eager to grab market share.”
What Zemp was referring to is a bill that was advanced last month by the House FInancial Services Committee that would establish a regulatory framework at the federal government for all stablecoins. That framework would take a look at rules for the possible registration and subsequent approval processes for issuers of stablecoins.
This is a change from past approaches to the stablecoin market, as policymakers and financial regulators pushed back against attempts by mainstream companies to launch stablecoins, such as Facebook’s efforts in 2019 to do so.