PayPal Launches US Dollar Stablecoin for Financial Payments, Transfers

Payments giant PayPal said on Monday it has launched a U.S. dollar stablecoin, becoming the first major fintech company to adopt the digital currency for payments and transfers.

While stablecoins—crypto tokens whose monetary value is pegged to a stable asset to protect against wild volatility—have been around for years, they have yet to make their way into the mainstream consumer payments ecosystem.

PayPal’s announcement sent its shares up 2.5 percent in afternoon trading, reflecting confidence in the struggling industry, which has grappled with regulatory headwinds over the past 12 months amid a string of high-profile closures. Intensified regulatory resistance.

Previous attempts by major mainstream companies to launch stablecoins have faced strong opposition from financial regulators and policymakers. Meta (then Facebook) plans to launch a stablecoin, Libra, in 2019 were thwarted by regulators’ concerns that it could destabilize global financial stability.

A string of major economies, from the UK to the EU, subsequently enacted rules governing stablecoins. The EU policy will come into force in June 2024.

Last month, the U.S. House of Representatives Financial Services Committee also introduced a bill establishing a federal regulatory framework for stablecoins that would focus on rules for the registration and approval process of stablecoin issuers.

PayPal’s stablecoin, called PayPal USD, is backed by U.S. dollar deposits and short-term U.S. Treasury bills, and will be issued by the Paxos Trust. It will gradually open to PayPal customers in the US.

Argus Research Corp analyst Stephen Biggar said PayPal’s brand name makes the launch of the stablecoin significant, but the company has been associated with cryptocurrencies before, so it’s not surprising.

Visa also said it will allow the use of cryptocurrencies to settle transactions on its payments network in 2021.

© Thomson Reuters 2023


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