During the expansion of crypto business: PayPal explores launching a US dollar stablecoin

Payments giant PayPal Holdings Inc. said it is exploring launching its own stablecoin as part of its expansion into cryptocurrency , a development the company confirmed after evidence of the move was found in its iPhone app.

“We are exploring a stablecoin. We would of course work closely with the relevant regulators if we seek to move forward,” Jose Fernandez da Ponte, senior vice president of crypto and digital currency at PayPal, said in a statement to Bloomberg News. Stablecoins are cryptocurrencies that are backed and priced by the value of an existing currency or commodity.

Developer Steve Moser first discovered evidence of the company's exploration of building a stablecoin in PayPal's app and shared it with Bloomberg. Hidden code and images show a work called "PayPal Coin." The code suggests that this stablecoin will be backed by the US dollar.

A PayPal spokesperson said the imagery and code in the PayPal app originated from a recent internal hackathon, where engineers worked together in the company's blockchain, crypto and digital currency division to quickly explore and build new products that may never be released publicly. This means the final logo, name and features may change in the form they are released publicly.

PayPal has made a major cryptocurrency effort in recent months, launching new features for buying and holding digital currencies, as well as the ability to make purchases using those currencies.

Speaking on the Unchained podcast, Fernandez da Ponte recently said that the company “has not seen a stablecoin designed specifically for payments.” He further said that for PayPal to be used, the stablecoin would need to support large-scale payments and have security .

“There has to be clarity on regulation, the regulatory framework and the types of licences required in this sector,” he said.

PayPal isn’t the first tech giant to try to launch its own digital currency. Facebook’s predecessor Meta Platforms Inc. has been helping to develop a stablecoin called Diem, while Visa Inc. in recent months allowed a dollar-backed stablecoin to settle transactions on its network.

In fact, several major payment giants such as PayPal have already changed their views on the crypto industry.

On December 16 last year, New York-based research firm MoffettNathanson told clients in a report that Visa, Mastercard and PayPal do not consider the rise of the crypto industry a threat and will continue to invest in the crypto ecosystem.

The report highlights the growing acceptance of cryptocurrencies by legacy payment services companies and underscores their efforts to adapt to the changing environment.

Visa sees cryptocurrency as something beyond payments, considering it a second-layer solution that can run on blockchain networks, just as the company does on fiat-based networks. Terry Angelos, Visa senior vice president and global head of fintech , said that through its partnerships with crypto wallets , the company expects transaction volumes to grow strongly in the next one to two years.

Raj Dhamodharan, executive vice president of blockchain and digital asset products at Mastercard, said that Mastercard benefits from cross-border cryptocurrency inflows and outflows through cryptocurrency exchanges and wallets, and sees cryptocurrency as an opportunity to build new products. The company also intends to become an entry point to the NFT market and add cryptocurrency as a native currency for settlement to its multi-rail network.

At the same time, PayPal is investing in education-related projects in hopes of reaching a wider range of users. Edwin Aoki, the company’s technical researcher and chief technology officer of blockchain encryption and digital currency, said the company is also working on opening its platform to allow interaction with DeFi networks and enabling users to securely transfer cryptocurrencies through digital wallets.

Additionally, PayPal is now actively monitoring first- and second-layer networks that process scalable payments, including Ethereum, Polkadot , Solana , and Algorand . PayPal is studying how these networks and their currencies fit into its plans for scalable payments infrastructure.