The world’s largest payments company, PayPal, announced on Monday that it has established a US dollar stablecoin, making it the first significant financial technology company to accept digital currencies for transfers and payments.
Stablecoins have been around for years, but they haven’t yet made a significant impact on the standard consumer payment environment because their monetary worth is tied to a stable asset rather than a volatile one.
The news from PayPal, which increased its shares by 2.5 percent in afternoon trade, is a vote of confidence in the ailing sector that has struggled with regulatory challenges for the past 12 months that have been made worse by a succession of high-profile failures.
Stablecoin launches by large, well-known corporations in the past have been met with vehement hostility from financial regulators and legislators. Regulators expressed concerns that Meta’s and later Facebook’s plans to introduce Libra, a stablecoin, in 2019 might disturb the stability of the global financial system.
Since then, a number of significant economies, including the European Union and Britain, have established regulations for stablecoins. The policies of the EU will take effect in June 2024.
A plan to create a federal regulatory framework for stablecoins, with a particular emphasis on guidelines for the registration and licencing process for stablecoin issuers, was also advanced last month by the US House Financial Services Committee.
PayPal’s stablecoin, known as PayPal USD, will be released by Paxos Trust and is backed by short-term US Treasury securities and US dollar deposits. American PayPal users will gradually be allowed to access it.
PayPal’s brand recognition makes the stablecoin’s debut noteworthy, according to Argus Research Corp. analyst Stephen Biggar, but the corporation has already been linked to cryptocurrencies, so it’s not surprising.
