PayPal launched on Monday, August 7, a "stablecoin" at parity with the dollar, the PayPal USD, the first so-called "stable" cryptocurrency deployed by a large company specializing in online payments, while the cryptocurrency industry is closely scrutinized by regulators.
PayPal users will be able to buy PayPal USD, transfer it to other digital wallets, convert it into other cryptocurrencies, use it to pay online or to pay money to relatives, the California-based group said in a statement. "The transition to digital currencies requires a stable instrument, which is born online and easily connects to fiat currencies like the US dollar," Dan Schulman, CEO of PayPal, said in the statement.
Stablecoins are cryptocurrencies: transactions are recorded on a decentralized ledger, the blockchain, and not by a bank as for conventional currencies. But, while cryptocurrencies like bitcoin and ether see their prices fluctuate significantly, stablecoin creators are aiming for a stable price. PayPal thus promises parity with the dollar, thanks to reserves in this currency.
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But stablecoins have not been spared the problems of the sector. The prices of some of them faltered when the prices of cryptocurrencies plunged in the spring. In mid-February, a US regulator ordered Paxos to stop issuing a stablecoin, the BUSD, on behalf of Binance. This was the first blow to the largest platform for buying cryptocurrencies, accused since by the US stock market policeman, the SEC, of having circumvented the regulation.
PayPal also chose Paxos to issue its own stablecoin. The company will have to publish monthly reports on its reserves, which will be audited.
An essential cog
For now, stablecoins are mainly used to facilitate the exchange of cryptocurrencies between them by investors, without having to go through a bank, making them an essential cog in the crypto industry. They also give users access to a product pegged to the dollar without having a bank account in the United States. "PayPal USD is designed to reduce friction in payments in virtual environments, facilitate transfers to help friends and family, send funds or make international payments, enable direct flows to developers and creators, and drive the expansion of digital assets by the world's leading brands." summarizes PayPal.
While authorities are looking for ways to better regulate cryptoassets and several major platforms have gone bankrupt, Sam Altman, the boss of OpenAI (ChatGPT) last month launched a new cryptocurrency, Worldcoin, with a system of identity verification from the human iris.