PayPal Holdings Inc., which became the first global payments firm to launch a stablecoin on Monday, plans to generate revenue from the product from its use in payment transactions.
That’s in addition to any interest income from assets backing the stablecoin, such as dollar deposits and short-term Treasuries, which historically has been a “high-margin revenue stream” for stablecoin businesses, Jose Fernandez da Ponte, senior vice president of PayPal’s blockchain, crypto and digital currencies, said during an interview Tuesday on Bloomberg TV.
“Over time, going back to us as a payments company, we are interested in driving payment flows here that we will also be monetizing in a number of ways that are beyond just strictly the monetization of the reserve,” Fernandez da Ponte said.
Stablecoins — crypto tokens that are pegged to an asset like the dollar — have been around for almost a decade, but they’re mostly used by traders to move digital assets between exchanges and have made limited inroads into consumer payments.
He declined to comment on details of the company’s financial agreement with partner Paxos Trust Co. PayPal doesn’t offer yield to users of the stablecoin.
The company expects that initial adoption of its stablecoin PayPal USD, or PYUSD, will be in the crypto sector, before gradually gaining adoption in areas like remittances and video games.
PYUSD is designed to be redeemable for dollars at all times and can also be exchanged for other cryptocurrencies available on PayPal’s network. It can be used to fund purchases and will soon be available on PayPal’s popular payments app Venmo. Users will eventually be able to send their token holdings between a PayPal and a Venmo wallet.
While only being available to US customers, the coin can also be moved to compatible third-party wallets outside the PayPal network.
On remittances, “one of the places where we think we will be differential and where we can add value is that we bring that connectivity to that last mile through the network that we have built over the years,” he said. In 2015, PayPal bought Xoom Corp., a digital money transfer service used to send money abroad.
PayPal’s stablecoin “creates the long-term optionality of generating new revenue streams,” even though “payment use-cases are likely to remain non-existent/niche,” wrote analysts including Harshita Rawat at Bernstein in a research report Tuesday.
--With assistance from Kailey Leinz.