Payments giant PayPal Holdings Inc. finally launched its long-awaited stablecoin cryptocurrency offering Monday for payments and transfers.

Stablecoins are a type of cryptocurrency that are “pegged” to another currency so that a single token can be exchanged one-to-one. In the case of PayPal’s new currency, called PayPal USD or PYUSD, a single token can be exchanged for $1 USD.

PayPal USD is issued by the Paxos Trust Co. LLC and 100% backed by United States dollar deposits, short term U.S. Treasuries and similar cash equivalents. PayPal previously partnered with Paxos in 2020 to offer cryptocurrency services to its customers to allow users to buy, hold and sell cryptocurrencies including bitcoin, Ethereum, Bitcoin Cash and other currencies.

“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 chief executive of PayPal.

Stablecoins are widely used as a bridge for exchange during cryptocurrency financial transactions due to their lack of volatility, although they have not been adopted widely for pure consumer and merchant transactions. According to PayPal, the new PayPal USD will become available for consumers, merchants and developers to connect for digital transactions as simply as all of their other products and will become the only stablecoin supported on its network.

PayPal’s interest in a stablecoin offering first emerged in early 2022 after the company confirmed that it was looking into developing and launching a stablecoin. At the time a developer had discovered a references something called “PayPal Coin” within the company’s iOS app.

The technical details state that it’s an ERC-20 token supported on the Ethereum blockchain network, which means that it is already widely available and accessible to a broad community of developers to embed in crypto wallets and applications. This also means that it can be easily implemented for cryptocurrency exchange and built into existing payment flows.

As mentioned above, PayPal chose Paxos because of the company’s already existing work with the company and because Paxos is a fully licensed limited purpose trust company with regulatory oversight from the New York State Department. PayPal itself was issued a BitLicense from the New York State Department of Financial Services in 2022, a regulatory framework which has become the basis for regulations in other states.

“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,” said Schulman.

Eligible PayPal customers in the U.S. customers who purchase U.S. dollars in the app will be able to use the new stablecoin to transfers between PayPal and other compatible wallets, send person-to-person, fund purchases and convert between currencies. The company also said the new stablecoins will soon be available in the Venmo payment app.

Photo: PayPal