Financial infrastructure provider PayPal has introduced a cryptocurrency linked to the value of the U.S. Dollar, known as a stablecoin, called PayPal USD (PYUSD) on Monday.
A stablecoin is a kind of cryptocurrency that is meant to be less volatile than popular options such as Bitcoin and Ether, because they are linked to the value of a fiat currency and are usually backed by the same at a 1:1 ratio.
The company said that PayPal USD was issued by the Paxos Trust Company and “100% backed by U.S. dollar deposits, short-term U.S Treasuries and similar cash equivalents.”
PayPal USD buyers will be able to transfer PayPal USD between PayPal and compatible external wallets, make person-to-person payments using the stablecoin, pay with PayPal USD, and convert any of PayPal’s supported cryptocurrencies to and from the stablecoin.
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“PayPal USD is designed to reduce friction for in-experience payments in virtual environments, facilitate fast transfers of value to support friends and family, send remittances or conduct international payments, enable direct flows to developers and creators, and foster the continued expansion into digital assets by the largest brands in the world,” said the company’s press note, adding that PYUSD would soon be available on Venmo.
Stablecoins such as Tether (USDT) and USD Coin (USDC) are popular in countries where the native currency is depreciating in value, so residents convert their savings to relatively more stable cryptocurrencies to safeguard their funds. However, questions have been raised about how fully these assets are backed and their issuers’ lack of transparency.
This matter came to light when in 2022, the Terra USD (UST) stablecoin suffered a near total collapse in value.
PayPal’s new stablecoin was not yet listed or tracked on the popular crypto coin tracking platform CoinMarketCap.