Electronic payments firm PayPal launched a US dollar-linked stablecoin on Monday in a bid to boost the adoption of digital currencies for payments and transfers.
The stablecoin, known as PayPal USD, is backed by US dollar deposits and short-term US treasuries, and will be issued by Paxos Trust. PayPal’s shares rose 1.4% to US$63.66.
Stablecoins are cryptocurrencies designed to be protected from the wild volatility that makes it difficult to use digital assets for payments or as a store of value.
PayPal USD is pegged to the dollar and will gradually be available to the company’s customers in the US, the digital payments firm said.
Last month, a US congressional committee failed to come to an agreement on a bill to establish a federal regulatory framework for stablecoins.
Visa had said in 2021 that it would allow the use of the cryptocurrency USD coin to settle transactions on its payment network.
PayPal USD is fully backed by US dollar deposits, short-term US treasuries and similar cash equivalents, and can be redeemed 1:1 for US dollars. Eligible US PayPal customers who purchase PayPal USD will be able to:
- Transfer PayPal USD between PayPal and compatible external wallets;
- Send person-to-person payments;
- Fund purchases with PayPal USD by selecting it at checkout; and
- Convert any of PayPal;s supported cryptocurrencies to and from PayPal USD.
“The shift towards digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the US dollar,” said PayPal president Dan Schulman in a statement on Monday.
PayPal USD
As an ERC-20 token issued on the ethereum blockchain, PayPal USD will be available to an already large community of external developers, wallets and web3 applications, and can be easily adopted by crypto exchanges, PayPal said.
Starting in September, Paxos will publish a public monthly reserve report for PayPal USD that outlines the instruments composing the reserves, as well as a public third-party attestation of the value of PayPal USD reserve assets. – (c) 2023 Reuters, with additional reporting (c) 2023 NewsCentral Media