PayPal confirmed on Jan. 7 that it is preparing to launch its own stablecoin cryptocurrency backed by the U.S. dollar, after signs of the move were found on its iPhone app.
Developer Steve Moser of The Tape Drive discovered evidence in the PayPal app of an experimental cryptocurrency called “PayPal Coin,” which he shared with Bloomberg.
“We are exploring a stablecoin; if and when we seek to move forward, we will of course, work closely with relevant regulators,” said Jose Fernandez da Ponte, senior vice president of crypto and digital currencies at PayPal, in a statement to Bloomberg News.
Stablecoins are cryptocurrencies that are pegged to the value of a non-blockchain physical asset, such as fiat currencies, government bonds, or commodities, like gold.
It is theorized that a stablecoin backed by an established global currency, such as the U.S. dollar, would reduce the price volatility common with other crypto assets.
The new cryptocurrency is, for now, in development at the company’s blockchain, crypto, and digital currencies division, and certain features, as well as the currency name, may change when it is ready to launch, according to a PayPal spokesperson.
This is not the first step towards embracing crypto technology for PayPal, which been researching ways to integrate digital coins on to its platforms.
PayPal allowed its customers in the U.S. to begin holding cryptocurrency in October 2020 after a software update, and then enabled purchases with supported digital currencies from the platform in March 2021.
The payment service currently supports the exchange and storage of Bitcoin, Bitcoin Cash, Ethereum, and Litecoin.
PayPal does not charge fees for holding cryptocurrency, but it does charge a small transaction fee of about 2.3 percent.
The bonus of using PayPal for cryptocurrency is its fraud protection for purchases, which it shares with the use of fiat currency on the platform.
On the Unchained podcast, Da Ponte said that he has “not yet seen a stablecoin out there that is purpose-built for payments,” and that for PayPal’s use, a stablecoin would need to support payments at scale and have security, while also fitting into existing regulatory frameworks.
More than 27 million U.S. based merchants have a small-to-medium business account on the PayPal platform.
Merchants can use their respective PayPal accounts to accept customer payments online or in person, and the company has enabled owners to take out loans, automate bookkeeping, and generate invoices.
Other tech companies and payment services have also been looking into creating their own cryptocurrencies.
Visa has recently allowed a stablecoin backed by the U.S. dollar to settle transactions with their network.
Meta Platforms, formerly known as Facebook, has set up its own crypto currency, “Diem,” which was rebranded from “Libra,” after Facebook’s cryptocurrency department announced the new name and organizational independence from the company in 2020.
PayPal has yet to comment or mention of the target date for the launch of its new cryptocurrency.