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DeFi and Credit Risk
On Monday, PayPal, the global payments giant, made a significant announcement about its venture into the cryptocurrency market. The company revealed the launch of its very own stablecoin named "PayPal USD" (PYUSD), which is pegged to the U.S. dollar.
The Ethereum-based token, PYUSD, will soon be accessible to PayPal users in the United States, marking a significant milestone as it becomes the first stablecoin ever to be issued by a major financial institution. With this development, users will have the convenience of transferring PYUSD between their PayPal accounts and supported external wallets. They can utilize the token to fund purchases of goods and services, as well as seamlessly convert between PYUSD and any of PayPal's supported cryptocurrencies. This move represents a remarkable step forward in bridging the gap between traditional financial systems and the world of blockchain-based digital assets.
PayPal announced that the stablecoin will be made accessible to an "already large and growing community of external developers, wallets and web3 applications," emphasizing its seamless integration with crypto exchanges.
PYUSD, an acronym for Paxos-backed USD, is a cryptocurrency issued by Paxos Trust, a renowned crypto financial services firm headquartered in New York. The PYUSD token is entirely backed by deposits in U.S. dollars, short-term Treasuries, and other equivalent liquid assets. Holders of PYUSD have the assurance that they can redeem it for U.S. dollars at any given time. Additionally, PYUSD can be conveniently exchanged for various other cryptocurrencies available within the PayPal network, including bitcoin (BTC), bitcoin cash (BCH), ether (ETH), and litecoin (LTC).
"The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar," said Dan Schulman, president and CEO of PayPal, in a press statement. "Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD."
PYUSD will initially be accessible through PayPal, followed by integration into its widely-used Venmo application.
In an effort to allay concerns regarding unbacked tokens, PayPal announced that it will furnish verified reports of the funds supporting the stablecoin.
"Beginning in September 2023, Paxos will publish a public monthly Reserve Report for PayPal USD that outlines the instruments composing the reserves," the firm said in a release. "Paxos will also publish a public third-party attestation of the value of PayPal USD reserve assets."
"The attestation will be issued by an independent third-party accounting firm and conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants (AICPA)," it added.
Bloomberg was the pioneer in breaking the news.
