PayPal launches Stablecoin backed by US dollar

PayPal, the global payment giant, announced its very own U.S. dollar Stablecoin on Monday, marking a pivotal moment in the integration of digital currencies into mainstream transactions. After the announcement, PayPal’s share hiked 2.66 percent

PayPal USD, a Stablecoin backed by US dollar deposits and short-term US Treasuries, will be released by Paxos Trust Co. PayPal consumers in the United States will progressively be allowed to use it.

Paxos will begin publishing a public monthly reserve report for PayPal USD in September 2023, outlining the instruments that comprise the reserves. Paxos will also provide a public third-party attestation of the value of PayPal USD reserve assets available to the public.

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An independent third-party accounting firm will grant the attestation, conducting it in accordance with the attestation requirements of the American Institute of Certified Public Accountants (AICPA).

Moreover, PayPal USD reserves are completely guaranteed by US dollar deposits, US Treasuries, and comparable cash equivalents, and PayPal USD can be bought or traded at a rate of $1.00 per PayPal USD through PayPal.

The token may be redeemed for US dollars at any moment, and it can also be used to purchase and sell other cryptocurrencies available on PayPal's network, including bitcoin.

"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, president and CEO, PayPal. "Our commitment to responsible innovation and compliance, and our track record of delivering new experiences to our customers provide the foundation necessary to contribute to the growth of digital payments through PayPal USD."

Stablecoins navigate regulatory and industrial challenges.

Stablecoins are crypto tokens whose monetary value is pegged to a stable asset, which protects the coin from market volatility that occurs in the market. Notably, these coins are still in their initial stages of making headway into mainstream consumer payment ecosystems.

Consumers predominantly use Stablecoins for trading other cryptocurrencies like bitcoin and ether, leading to struggles within the Stablecoin market. The world’s largest Stablecoin is Tether, followed by USD Coin, which is issued by crypto provider Circle.

Furthermore, attempts by big mainstream firms to create Stablecoins in the past have been greeted with significant criticism from financial authorities and legislators. Meta's, formerly Facebook's, intentions to introduce a Stablecoin, Libra, in 2019 were thwarted when authorities voiced concerns that it would disrupt global financial stability.

Since then, a slew of major economies, from the United Kingdom to the European Union, have established legislation to oversee Stablecoins. The EU's regulations will take effect in June 2024.

However, now that PayPal is stepping into the spotlight, experts anticipate increased attention from regulatory bodies like the Federal Reserve and the Securities and Exchange Commission.

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