PayPal now offers PayPal-USD, a brand-new cryptocurrency.
The online payments firm launched its stablecoin backed by the dollar on Monday, making it the first significant U.S. financial institution to do so.
Stablecoins are typically backed by a physical asset, such as commodities like gold or fiat currencies like the U.S. dollar, which helps the stablecoin maintain a relatively consistent price. This is in contrast to other cryptocurrencies, which derive their value based on how much crypto traders are willing to pay for them at the moment.
Short-term U.S. Treasury bonds, deposits in U.S. dollars, and other cash equivalents fully back PayPal USD. Additionally, one PayPal USD can be exchanged for one U.S. dollar and vice versa, thanks to the stablecoin’s 1:1 conversion rate.
PYUSD is a cryptocurrency that is issued by Paxos Trust business. This financial technology business specializes in blockchain and provides crypto brokerage services, and it is based on the Ethereum blockchain. Notably, in February, the New York State Department of Financial Services ordered Paxos to halt issuing BUSD, Binance’s stablecoin tied to the dollar.
Using cryptocurrency is not new to PayPal. The business started enabling customers to transfer, transmit, and receive a number of well-known digital tokens, including Bitcoin and ether, last year.
Beginning on Monday and during the following weeks, PayPal users who purchase PayPal USD will be able to convert any of the accepted cryptocurrencies of PayPal, send it to compatible external crypto wallets, send peer-to-peer payments, pay for purchases, and more.
Why PayPal USD stablecoin move makes sense
It may align with PayPal’s primary business strategy more than people originally believed to issue a stablecoin.
PayPal’s primary source of income is the fee it levies on retailers in exchange for processing customer payments. The company, however, would only be able to levy those fees if the same clients and merchants started conducting their business using cryptocurrency on the Ethereum blockchain.
What crypto investors need to know about stablecoins
According to Malekan, using stablecoins is no different than purchasing a gift card financially. Stablecoins can be bought with dollars and then used to buy other cryptocurrencies or to make other online purchases.
Stablecoins are only sometimes a guaranteed thing, despite their name.
Following the demise of the terraUSD (UST) stablecoin in May of last year, investors suffered losses in the tens of billions of dollars. But unlike PayPal’s stablecoin, UST’s peg to the dollar was maintained by algorithms rather than cash reserves.
Malekan advises anyone interested in using stablecoins only to purchase them from reputable, licensed issuers
According to Decrypt, several phony crypto tokens with the name PYUSD have already appeared on Uniswap, a decentralized exchange, in a bid to capitalize on the excitement around PayPal’s new stablecoin.
The platform claims that the only way to purchase its stablecoin is directly from the business. It has not stated that it intends to make it accessible on independent cryptocurrency exchanges. Malekan advises caution when it comes to the amount of money you invest in cryptocurrency, as with everything else. Use only the amount of money that you wouldn’t mind losing if something went wrong.
With PayPal’s USD, you can send money quickly to friends and family, send remittances, and make international payments. It also makes it possible for you to send money directly to developers and other creators, which encourages the biggest brands in the world to keep investing in digital assets. The majority of stablecoin usage at the moment is in web3-specific environments; it will be immediately interoperable with that ecosystem and will shortly be accessible on Venmo.