PayPal launches US dollar stablecoin

PayPal is to be the first major fintech firm to take on digital currencies with the launch of a U.S. dollar-denominated stablecoin, ‘Paypal USD’.

The dollar-backed cryptocurrency is redeemable 1:1 for US dollars, making it a ‘stablecoin’, and is issued by fintech firm Paxos Trust Company.

Stablecoins are crypto tokens whose monetary value is linked to a stable asset, such as the US dollar, to protect it from volatility.

Interest in them has grown after the wider cryptocurrency market faced a decline in trust following the collapse of exchange market FTX last year.

Since then, policymakers have cracked down on the sector and it is predominantly central bank digital currencies (CBDCs) that have taken to the limelight with more intense regulation.

“The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the US dollar,” commented Dan Schulman, president and CEO of PayPal.

“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 digital currency will be available to consumers, merchants, and developers to connect fiat and digital currencies.

The fintech firm says that PayPal USD is designed to facilitate payments in virtual environments, such as the metaverse and in Web3, send transfers to friends and families, send remittances or conduct international payments, among other benefits.

In a statement, Patrick McHenry, Republican representative of the US House Financial Services Committee, said that PayPal’s announcement is an indication that stablecoins “hold promise as a pillar of our 21^st century payments systems.”

“We are currently at a crossroads to keep America at the forefront of digital asset innovation. Congress is making significant, bipartisan progress on legislation to ensure the U.S. leads the financial system of the future,” he said.

On social media platform X, formerly known as Twitter, Paxos posted: “PYUSD is the first of its kind, representing the next phase of US dollars on the blockchain.”