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PayPal launches its own cryptocurrency



PayPal has launched PayPal USD, a form of cryptocurrency it says can “seamlessly connect fiat and digital currencies”.

This form of cryptocurrency is a little different to often-discussed digital currencies like Bitcoin, though. PayPal USD is a stablecoin. This means its value is linked to the US dollar. One PayPal USD equals one dollar.

PayPal says the currency will “soon be available on Venmo,” which is one of the most-used mobile payments apps in the US, and has been owned by PayPal since 2013.

Stablecoins are often used as a bridge between normal currencies and crypto, an area in which Paypal is already heavily invested. You can buy and sell Bitcoin, Ethereum, Litecoin, and Bitcoin Cash through Paypal’s platform.  It then makes money in transaction fees when you buy or sell these digital assets.

PayPal USD will operate on the Ethereum blockchain as an ERC-20 token. This effectively means it uses the same technical back-end as the Ethereum cryptocurrency.

Paypal says PayPal USD will be “rolling out in the coming weeks” to “eligible US PayPal customers”.

We have approached PayPal for comment on the future availability of PayPal USD to UK folks.

Is cryptocurrency regulated in the UK?

The Financial Services and Markets Bill, which passed into law at the end of June, established a framework within which stablecoins like PayPal USD will be regulated in the UK.

It’s a 300-plus page bill that looks to rewrite the UK’s financial regulation in a post-Brexit shake-up. “The Government’s near-term priority is to ensure the framework supports the safe use of stablecoins,” read a 2021 consultation paper that predated the bill.

Stablecoins are intended to be significantly less volatile than assets like Bitcoin, which is currently 1.68x its value in December 2022, but only 0.47x of what it was worth in November 2021.

How safe is crypto?

These forms of crypto assets are not bulletproof, though. Terra UST is the most startling example. Its collapse in May 2022 wiped out an estimated half-a-trillion dollars from the crypto market.

However, PayPal USD is a little different to Terra UST. While both are “pegged” to the US dollar, Terra UST was an algorithmic stablecoin, meaning its value still relied on another cryptocurrency, called LUNA.

PayPal USD is backed by actual money deposits, or “US dollar deposits, US treasuries, and similar cash equivalents,” according to PayPal, and is issued by Paxos Trust Company.

Being linked to a fiat currency may turn off cryptocurrency investors who have spent the past decade with eyes glued to Bitcoin value charts. But PayPal’s aim appears to be to make digital currencies appear more digestible and approachable to the general public.

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