PayPal’s Latest Move: Is It Stable?

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Global payments company PayPal is pursuing the development of its own stablecoin. This according to company officials who confirmed the move after it was detected inside its iPhone iOS app. 

A developer by the name of Steve Moser identified references to “PayPal Coin” within the app. Hidden code and images were detected indicating that the coin would be backed by the U.S. dollar. 

PayPal senior vice president of crypto and digital currencies Jose Fernandez da Ponte confirmed the findings after they were contacted by Bloomberg. 

Said da Ponte in a statement to Bloomberg:

“We are exploring a stablecoin; if and when we seek to move forward, we will of course, work closely with relevant regulators,” 

A PayPal spokeswoman confirmed that the images and code embedded inside the PayPal app were the result of a recent internal hackathon aimed at helping the company explore and construct new products, many of which never see a public release. 

In recent years, PayPal has released a flurry of new features for purchasing and selling crypto as well as its use in everyday commerce. New functions were integrated into the app allowing users to purchase new cryptocurrencies in 2020. In March of last year, a new "Checkout with Crypto" feature was added allowing users to purchase products, goods, and services with Bitcoin, Bitcoin Cash, Litecoin, and Ethereum. 

Moser noted that his PayPal app findings revealed that work is taking place to support the NEO cryptocurrency as well, in addition to the new developments around stablecoin. 

With this recent discovery that PayPal is exploring this stablecoin launch, questions are now surfacing around what this could mean for the regulation of payment transactions. 

Says Adam Nasli, head analyst of international broker comparison site BrokerChooser: 

“PayPal announced in early January that it is exploring the launch of its own stablecoin. In recent years, PayPal introduced more services around digital currencies, such as buying and selling cryptos. We’ve also seen examples of exploring stablecoin by tech companies. For example, Facebook (Meta)’s sponsored stablecoin, called Libra/Diem, didn’t succeed and Facebook will sell all assets related to Libra/Diem to Silvergate Capital Corporation.”

Stablecoins are cryptocurrencies that peg their value to an external asset. While most cryptocurrencies are really volatile in price, stablecoins could bring more stability in price by pegging its value to an asset or using methods to control the stablecoin supply. The asset which is the collateral behind stablecoin can be a fiat currency, like USD or EUR, a cryptocurrency, like Ethereum, precious metal, real estate, and other assets.

There are also scenarios where stablecoins may not be backed by any asset, choosing instead to utilize methods to control a stablecoin’s supply. 

The launch of a stablecoin by an enterprise of PayPal’s scope and magnitude could have an outsized impact on the global payments space and our lives. Lower transaction costs and accessibility by a wide number of users could exponentially crypto global market presence. 

However, questions remain about their regulatory implications. Concludes Nasli

“Stablecoins launched by private companies raise many regulatory questions. For example, there should be proper risk management behind stablecoins to ensure there is enough reserve. It could also limit the effect of monetary policy if such a stablecoin would be widely used in an economy.”

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