PayPal Stablecoin Could Be Coming Soon. Should You Buy?

The company says it will be backed by the U.S. dollar and they'll work with regulators.

PayPal Holdings Inc. has publicly confirmed its intentions to launch its own cryptocurrency stablecoin as first reported by Bloomberg. In the article, the global payment titan announced that it is working on a private stablecoin, and that its crypto would be pegged to the U.S. dollar. There was not any mention of a timetable for rollout or target date for launch. PayPal confirmed the announcement, responding to our inquiry for comment. "We are exploring a stablecoin; if and when we seek to move forward, we will of course, work closely with relevant regulators," per PayPal's official statement via email to The Ascent by The Motley Fool.

What is a stablecoin exactly?

Stablecoins are a class of blockchain-based e-money that’s pegged to non-blockchain physical assets such as government bonds, reserve currencies, or gold. The thinking is that linking a stablecoin to a proven resource, such as the U.S. dollar, smooths out the extreme price fluctuations that commonly occur within the crypto space.

PayPal expands its crypto offerings

PayPal's stablecoin intentions came to light when someone shared with the media a "PayPal Coin" logo that was featured on the company's iPhone app as part of its exploratory testing into its own token. The company already offers retail customers the opportunity to buy and sell a handful of cryptocurrencies, Bitcoin, Ethereum, Litecoin, and Bitcoin Cash specifically -- with as little as $1 to start.

PayPal also provides a suite of crypto solutions for small businesses. According to its website, roughly 30 million merchants have a small to medium business account with PayPal. Merchants use their respective accounts to accept customer payments online, in person, or on the go. PayPal also enables owners to take out loans, automate bookkeeping, and generate invoices.

Other tech players have tested crypto coins

PayPal is the latest tech company to explore its own crypto coin. We know of Facebook/Meta's stalled efforts with Libra/Diem, but many people don't know that Amazon has digital aspirations as well. The world's largest online retailer currently has a unique digital currency of its own that's been around for years. It's called AmazonCoins. While the tokens can currently be used only for Amazon-hosted gaming and apps, it already exists and has traction within the Amazon ecosystem.

Would PayPal Coin be a good investment?

At this point it's too early to tell if everyday investors should buy into a PayPal Coin if it comes to pass, because we don't have enough details. However, PayPal is the second most trusted brand globally, according to Morning Consult's annual ranking, beating all other payment providers including Visa and Mastercard. It also has the payment processing infrastructure in place, global scale, and existing retail relationships -- that all makes sense for PayPal to push further into crypto. A key unknown that the company refused to address when asked, was whether PayPal Coin would be available on centralized crypto exchanges such as Coinbase, Gemini, or Kraken.

Most stablecoins are used as a place to park profits and provide liquidity for crypto investors. So, while those funds are idling in an account, the custodian of the digital wallet -- in this case it would be PayPal -- often provides interest rates in the high-single or low-double-digit range. If PayPal offers those types of returns, it's definitely worth considering for anyone who's crypto curious.