PayPal Embraces Crypto, Announces Dollar-Backed Stablecoin: All You Need To Know
PayPal USD (PYUSD) is backed by US dollar deposits and short-term US treasuries.
Payments giant PayPal has launched its own US dollar stablecoin, making it the first major fintech company to embrace digital currencies for payments and transfers. The announcement has been met with optimism, as reflected in a 2.66 per cent rise in PayPal's shares on Monday. This move signifies a show of confidence in the cryptocurrency industry, which has faced regulatory challenges and high-profile collapses in the past year.
Stablecoins, digital tokens with their value tied to stable assets to mitigate volatility, have been in existence for some time but have yet to gain significant traction in mainstream consumer payments. Currently, stablecoins are mainly utilised for trading other cryptocurrencies like bitcoin and ether. Among stablecoins, Tether holds the top position, followed by USD Coin issued by crypto provider Circle.
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
Previous attempts by major mainstream companies to launch stablecoins have faced strong opposition from financial regulators and policymakers. Meta (formerly Facebook) faced difficulties with its stablecoin, Libra, in 2019, as regulators feared potential disruption to global financial stability. Countries like the UK and the EU have since implemented regulations governing stablecoins, with the EU's policies set to take effect in June 2024.
With PayPal's entry into the stablecoin arena, attention is expected from regulatory bodies such as the Federal Reserve and the Securities and Exchange Commission. Last month, the US House Financial Services Committee advanced a bill aiming to establish a federal regulatory framework for stablecoins, focusing on registration and approval processes for stablecoin issuers.
PayPal's stablecoin, named PayPal USD (PYUSD), is backed by US dollar deposits and short-term US. Treasuries and it will be issued by Paxos Trust Co. It will gradually become available to PayPal customers in the United States. The token is redeemable for US dollars at any time and can also be used to buy and sell other cryptocurrencies offered by PayPal, including Bitcoin.
According to Paxos Trust Co., this milestone development marks the next phase of US dollars on the blockchain, representing significant progress not only for Paxos and PayPal but for the entire financial industry.
In a similar move, Visa announced in 2021 that it would allow the use of cryptocurrency to settle transactions on its payment network, further showcasing the growing acceptance and adoption of digital currencies in the financial world.
Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Cryptocurrency is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Cryptocurrency market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.
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