The stablecoin industry has grown rapidly in recent years. Polygon Labs CEO Marc Boiron credits this to major payment providers who are integrating stablecoins into their systems. He said that companies like Stripe and PayPal are key drivers of this growth.
On Monday, PayPal launched its own U.S. dollar-backed stablecoin. This made it the first major U.S. financial company to do so. Unlike other cryptocurrencies, are backed by physical assets. These assets include fiat currencies like the U.S. dollar or commodities like gold. This backing helps them maintain a steady price.
PayPal’s stablecoin, PYUSD, is fully backed by U.S. dollar deposits, short-term U.S. Treasuries, and cash equivalents. A press release confirmed that PYUSD is redeemable 1:1 for U.S. dollars. Paxos Trust Company, a blockchain financial firm, issues the stablecoin.
Stablecoin growth: The role of major payment providers
Paxos also sold Binance’s stablecoin, BUSD, until a stop was called in February by New York regulators.PayPal has been in the crypto business for a while. It already provided users with the ability to receive and send crypto such as Bitcoin and Ether. PYUSD is now on offer on PayPal’s platform and is usable in purchases, peer-to-peer transfers, and crypto exchanges. The company is going to phase these features in.
Dan Schulman, PayPal’s CEO, believes digital currencies need a stable link to fiat money. He says PYUSD will help bridge the gap between traditional and digital finance.
Omid Malekan, an adjunct professor at Columbia Business School, says issuing a stablecoin aligns with PayPal’s business model. PayPal earns revenue from transaction fees, but if payments move to Ethereum, it risks losing that income. By launching PYUSD, the company ensures it remains relevant as blockchain technology evolves.
Malekan compares it to gift cards. Users buy stablecoins with cash and use them for purchases or crypto investments. But stablecoins are not risk-free. Last May, the TerraUSD (UST) collapsed, costing investors billions. Unlike UST, PayPal’s stablecoin has cash reserves to back its value.
Security concerns: Fake PYUSD tokens and investor caution
Security is another concern. Scammers have already created fake PYUSD tokens on Uniswap, a decentralized exchange. Decrypt reports that PayPal’s stablecoin is currently available only through PayPal itself. There are no plans to list it on third-party exchanges.
Malekan advises investors to be cautious when investing in crypto. Only invest money you can afford to lose. While PayPal’s stablecoin seems stable, the crypto industry remains unpredictable.
