Fintech giant PayPal has taken a major step in the use of digital currencies by completing its first business payment using its stablecoin, PayPal USD ($PYUSD).
This transaction was made to auditing firm Ernst & Young on 3 October 2024. It highlighted the growing role of stablecoins in business payments, promising faster and more efficient processes for companies.
The payment was processed through SAP’s digital currency hub, which is a platform designed to make digital transactions between companies secure and straightforward.
Although the exact amount of the payment has not been disclosed, this move is considered a milestone for PayPal, demonstrating how stablecoins can be used effectively in corporate transactions.
PayPal launched $PYUSD in 2023. As a stablecoin, its value is tied to the US dollar, unlike other more volatile cryptocurrencies like Bitcoin ($BTC) or Ethereum ($ETH).
With a market capitalisation of nearly $700 million, $PYUSD is backed by reserves in US dollars and short-term US Treasury securities, which gives it stability.
This makes it a more predictable and reliable option for businesses looking to use digital currencies for their payments.
By using $PYUSD, PayPal aims to show how stablecoins can help companies make instant payments without the delays often associated with traditional financial systems.
Ernst & Young’s involvement, as one of PayPal’s major auditors, further demonstrates the growing potential for stablecoins in the business world.
Stablecoins in B2B payments
Although stablecoins like $PYUSD are often seen as consumer-focused tools, this transaction shows their increasing importance for businesses.
Stablecoins allow companies to complete payments quickly and avoid many of the issues that come with using traditional financial systems.
PayPal’s senior vice president of blockchain and cryptocurrencies, Jose Fernandez da Ponte, sees great potential in the corporate world for this type of digital payment.
He highlighted how stablecoins could soon become a regular part of business financial operations, saying, “The corporate environment is perfect for this type of technology, and it is a rational conversation that many companies can have with their financial directors”.
Stablecoins offer several advantages, particularly for businesses in countries with unstable currencies. In recent years, companies have increasingly turned to stablecoins like Tether ($USDT) for cross-border payments.
They provide faster settlement times and help companies avoid the risks that come with traditional financial systems. By using stablecoins, businesses can also reduce transaction costs and complete payments more quickly.
With the launch of $PYUSD, PayPal hopes to offer these same benefits to businesses.
The future of stablecoins
Stablecoins like $PYUSD have not only caught the attention of businesses but are also being closely watched by governments and regulators.
In Europe, new regulations on crypto-assets, known as ‘Markets in Crypto-Assets Regulation’ (MiCA), are expected to take effect soon.
These regulations will introduce new rules for companies using cryptocurrencies, which could further push the adoption of stablecoins in business transactions.
In addition to PayPal, fintech companies like Robinhood and Revolut are also exploring the idea of launching their own stablecoins, showing the growing acceptance of digital currencies in the financial world.
The current stablecoin market is dominated by Tether, which has a market capitalisation of over $119 billion. The second-largest stablecoin, USD Coin ($USDC), has a market value of $35.3 billion.
With $PYUSD, PayPal aims to compete with these established players. The fact that a major company like Ernst & Young is using $PYUSD suggests that stablecoins could soon play a much larger role in how businesses handle payments.
PayPal’s decision to expand its cryptocurrency services shows its commitment to being a leader in the digital finance space.
In August 2024, PayPal took another important step by allowing merchants to buy, hold, and sell cryptocurrencies directly from their business accounts.
This move reflected PayPal’s ambition to make stablecoins a common payment tool for businesses, especially as the digital currency sector continues to face scrutiny following controversies like the FTX collapse.
