Introducing PayPal USD, a stablecoin tied to the U.S. dollar, digital payments giant PayPal now offers customers a new stablecoin payment method.
Through PayPal USD, users gain the ability to transition the stablecoin between virtual wallets, initiate peer-to-peer payments, utilize the digital currency for purchases, and alternate any of PayPal’s endorsed cryptocurrencies to and from PayPal USD seamlessly.
The groundbreaking stablecoin is entirely underpinned by U.S. dollar holdings, short-term Treasury securities, and financial equivalents. As characteristic of USD-anchored stablecoins, it can be converted to U.S. dollars on a 1-to-1 basis. Dan Schulman, PayPal’s president and CEO, stated, “like the U.S. dollar,” PayPal is in collaboration with Paxos Trust Company, headquartered in New York.
Although PayPal’s stablecoin is anchored to the U.S. dollar and can be effortlessly transferred and converted, remember that stablecoins, along with all cryptocurrencies, inherently remain some of the most hazardous financial assets.
Conversely, stablecoins, including PayPal USD, grant consumers expanded versatility and transaction alternatives, alongside a decentralized means of handling finances. Yet, any fluctuations in the dollar’s value might influence the coin’s worth.
In the realm of stablecoins, which are cryptocurrencies linked to the value of another financial entity—often a currency or merchandise—U.S. dollar-backed stablecoins hold a prominent position. The most substantial of such currencies are TetherUSD, USD Coin, and Binance USD.
As of 1:00 p.m. ET, PayPal’s stock registers nearly 3% higher in trading, although it has experienced a 12% decline year-to-date.
SEC’s Scrutiny and Regulatory Challenges
Facing potential legal action from the Securities and Exchange Commission (SEC), Paxos, the collaborator with PayPal in the stablecoin launch, encountered regulatory pressure in February. The SEC alleged Paxos’ Binance USD coin was an unregistered security.
This was a piece of a broader initiative by the agency to curb crypto enterprises considered to be breaching federal investment directives and whose digital assets pose a potential systemic threat. Enforcement activities intensified after the downfall of the cryptocurrency Luna and its related stablecoin, TerraUSD, in the previous year.
Future Outlook for Stablecoin Regulation
Although the SEC has initiated action against numerous crypto enterprises in the past few years, it has yet to establish a criterion for categorizing and overseeing stablecoins. In the February warning against Paxos, the SEC claimed that Binance USD represents an investment agreement with possible profit acquisition, qualifying it as a security. This viewpoint differed from the stance adopted against Terra, identified as an algorithmic stablecoin devoid of genuine investment support.