In a landmark move, global payment giant PayPal (PYPL.O) has unveiled its very own U.S. dollar stablecoin, marking a significant leap for digital currencies in the realm of payments and transfers.
PayPal’s groundbreaking announcement not only boosted its shares by 2.66% on Monday but also signifies a notable vote of confidence in the often tumultuous cryptocurrency sector. Over the past year, the industry has grappled with regulatory challenges, exacerbated by several high-profile collapses that shook investor confidence.
While stablecoins, digital tokens designed to maintain a consistent value by pegging it to a stable asset, have existed for years, their integration into mainstream consumer payment systems has remained elusive.
Traditionally, stablecoins have primarily served as trading vehicles for other cryptocurrencies like Bitcoin and Ether, rather than as direct tools for everyday transactions. Tether holds the crown as the largest stablecoin globally, closely followed by USD Coin, issued by crypto provider Circle.
Prior attempts by major mainstream players to introduce stablecoins have faced formidable resistance from financial regulators and policymakers. For instance, Meta’s (META.O), then Facebook, 2019 proposal to launch Libra, a stablecoin, was thwarted due to concerns that it could disrupt global financial stability.
Numerous economies, including the European Union and the United Kingdom, have since outlined regulatory frameworks for stablecoins, with the EU’s policies set to take effect in June 2024.
Ian Katz, Managing Director of Capital Alpha Partners, commented, “PayPal isn’t as polarizing as Facebook, but its high-profile nature is bound to capture the attention of Capitol Hill, the Federal Reserve, and the Securities and Exchange Commission.”
Recently, the U.S. House Financial Services Committee advanced legislation aimed at establishing a federal regulatory structure for stablecoins. The bill focuses on guidelines for the registration and approval process for stablecoin issuers.
Representative Patrick McHenry, Republican Chair of the committee, stated, “PayPal’s announcement underscores the potential of stablecoins as a cornerstone of our modern payment system. We stand at a pivotal juncture to ensure America remains at the forefront of digital asset innovation.”
PayPal’s stablecoin, named PayPal USD, is backed by U.S. dollar deposits and short-term U.S. Treasuries. The token will be issued by Paxos Trust Co. and will gradually roll out to PayPal customers in the United States.
Source: twitter.com
The PYUSD stablecoin can be redeemed for U.S. dollars at any time, and it can also be employed to purchase and trade other cryptocurrencies available on PayPal’s platform, including Bitcoin.
Paxos celebrated the launch by stating, “PYUSD is a pioneering creation, representing the next evolutionary step for U.S. dollars on the blockchain. This is a watershed moment not only for Paxos and PayPal but for the entire financial industry.” Visa (V.N) also made waves in 2021 by announcing its plans to enable cryptocurrency settlements on its payment network.
Source: reuters.com
