On Monday, multinational fintech firm PayPal introduced a U.S. dollar-backed stablecoin called PayPal USD (PYUSD). Powered by Ethereum, blockchain firm Paxos issues the PYUSD, gradually rolling it out to PayPal customers in the U.S.
Users can acquire the token through the company’s app or website at $1.00 per PYUSD. According to PayPal, PYUSD enables smoother transactions between fiat currencies and crypto.
“The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar,” said Dan Schulman, the president and CEO of PayPal, in a press release.
“Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.”
The company confirmed that users could convert PYUSD to various tokens supported by the PayPal platform. PYUSD allows its holders to conduct peer-to-peer transactions, even with external wallets. Users can also finance purchases using the currency at checkout points.
Following PayPal’s announcement, the company’s share increased by 2.66 percent.
PayPal’s move marks the first time a big fintech company has adopted digital currencies for payments and transfers. Prominent endeavors by mainstream corporations to introduce stablecoins have encountered resistance from financial regulators.
Facebook-parent Meta planned to launch stablecoin Libra in 2020. The effort was thwarted due to concerns raised by regulators over potential disruptions to global financial stability. Ian Katz, managing director of Capital Alpha Partners, said the PayPal brand is not “quite as polarizing” as Facebook, which often comes under regulatory scrutiny.
PayPal has long encouraged users to buy, transfer and trade cryptocurrencies within its app. These include Bitcoin, Bitcoin Cash, Ethereum and Litecoin. Moreover, since PayPal successfully secured the New York BitLicense last year, it can now authorize cryptocurrency transactions for customers within the state.
Paxos CEO Charles Cascarilla described PayPal’s new venture as “the most significant leap forward” in the financial industry. He said PYUSD proved “the real-world value” of blockchain.
U.S. House Financial Services Committee chair Patrick McHenry said Monday that stablecoins could potentially serve as a fundamental element of the 21st-century payment system.
“We are currently at a crossroads to keep America at the forefront of digital asset innovation,” McHenry said. “Congress is making significant, bipartisan progress on legislation to ensure the U.S. leads the financial system of the future.”
Regulatory discussions around stablecoins and other crypto continue among U.S. lawmakers. At the same time, the U.S. government has been exploring the concept of a national digital currency.
Last month, the House Financial Services Committee took a step forward by progressing a bill that aims to establish a federal regulatory structure for stablecoins. This legislation zeroes in on formulating regulations governing the registration and approval procedures for entities issuing stablecoins.
Several major economies, including the U.K. and the European Union, have subsequently established stablecoins regulations. The E.U.’s regulations will take effect in June 2024.
Although the crypto industry has known stablecoins for years, these tokens have yet to gain significant traction within the mainstream consumer payment landscape. Instead, stablecoins find more utility among consumers as tools for trading other crypto assets, such as Bitcoin and Ether. Tether ranks as the largest stablecoin, closely trailed by Circle’s USD Coin.
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