PayPal Extends Role of Stablecoin Into Funding AI Projects

PayPal is reportedly extending the role of its stablecoin into artificial intelligence finance.

That means linking the PYUSD coin to on-chain funding mechanisms from USD.AI, a stablecoin protocol offering credit to AI firms, CoinDesk reported Thursday (Dec. 18).

Loans issued by USD.AI to finance graphics processing units (GPUs), data centers and other AI infrastructures will be denominated in PYUSD, the report said. Borrowers will be able to have proceeds deposited directly into their PayPal accounts.

The approach is designed to mesh familiar payment workflows with programmable settlement aimed at long-term financing, rentals and emerging agent-driven transactions, according to the report. It also shows how stablecoins can be used as settlement instruments for capital-intensive industries outside of cryptocurrency.

Meanwhile, stablecoins on blockchain rails can help address payment frictions such as multiday settlement, foreign exchange slippage, float costs, limited transparency and reconciliation burden, PYMNTS reported in October.

“Because stablecoins are typically pegged to fiat currencies like the U.S. dollar, volatility is minimized,” the report said. “Settlement can become atomic and near instant. Token transfer and transaction metadata move together. Liquidity can be supplied just in time, so capital isn’t locked across multiple nostro accounts. Programmable rules can embed reconciliation, enforce compliance or trigger conditional transfers.”

Stablecoins have emerged as connective settlement layers in B2B cross-border flows, allowing chief financial officers to manage liquidity more efficiently. When Coinbase reported its quarterly earnings in July, CEO and co-founder Brian Armstrong said cross-border stablecoin payments are likely a $40 trillion opportunity, with the B2B market accounting for 75% of that.

PayPal’s move comes amid a surge in demand for AI infrastructure, CoinDesk’s Thursday report said. Morgan Stanley has estimated that worldwide AI compute spending could hit $6.7 trillion by 2029, which puts pressure on traditional capital markets and payment systems. Capital expenditure for AI could reach $360 billion for the year.

By the end of next year, Citi expects capital expenditures among hyperscalers, or data center operators, to reach $490 billion, up from a prior estimate of $420 billion.

To encourage adoption, PayPal and the USD.AI Foundation plan to roll out a one-year customer-incentive program offering 4.5% on up to $1 billion in deposits starting next month, according to the report.