PayPal, the payments giant, has taken a significant step by introducing a stablecoin tied to the U.S. dollar, making it the first major fintech company to incorporate digital currencies for payment transactions and transfers.
Stablecoins, which are cryptocurrencies pegged to stable assets to mitigate price volatility, have been in existence for some time. Despite this, they have struggled to gain widespread acceptance in the mainstream consumer payments ecosystem. The announcement from PayPal about its stablecoin launch positively impacted the company’s stock, increasing its value by 2.5% in afternoon trading. This move showcases their confidence in an industry that has faced challenges, including regulatory hurdles and prominent collapses, in the past year.
Other mainstream corporations’ attempts to introduce stablecoins have faced strong opposition from financial regulators and policymakers. For instance, Facebook’s plans to launch Libra, a stablecoin, were thwarted due to concerns raised by regulators about potential disruptions to global financial stability. In response to the growing popularity and potential risks associated with stablecoins, several major economies, including Britain and the European Union, have proposed regulatory frameworks to govern their usage. The EU’s policies are set to take effect in June 2024.
The U.S. House Financial Services Committee also recently advanced a bill to establish a federal regulatory framework for stablecoins, focusing on registration and approval rules for stablecoin issuers. PayPal’s stablecoin, named PayPal USD, is backed by deposits in U.S. dollars and short-term U.S. Treasuries, and Paxos Trust Co will issue it. The rollout of PayPal USD will gradually be made available to customers in the United States.
Today, we’re unveiling a new stablecoin, PayPal USD (PYUSD). It’s designed for payments and is backed by highly liquid and secure assets. Starting today and rolling out in the next few weeks, you’ll be able to buy, sell, hold and transfer PYUSD. Learn more https://t.co/53RRBhmNHx pic.twitter.com/53ur2KmjU7
— PayPal (@PayPal) August 7, 2023