As the first major financial technology company to accept digital currencies for payments and transfers, payments giant PayPal (PYPL.O) announced Monday that it has established a U.S. dollar stablecoin. Stablecoins, digital currency tokens whose value is anchored to a trusted asset in order to mitigate risk from price swings, have been existing for some time but have not yet broken into the mainstream consumer payments system.
The news boosted PayPal’s stock price by 2.5% in the afternoon, reflecting optimism for the industry as a whole, which has struggled over the past year against regulatory headwinds and a series of high-profile bankruptcies.
Financial authorities and legislators have already shown strong opposition to big mainstream corporations’ attempts to establish stablecoins. After regulators voiced concerns that Meta’s (META.O) stablecoin, Libra, could disrupt global financial stability, the company abandoned its intentions to release Libra in 2019.
Since then, a series of major economies, from the United Kingdom to the European Union, have established regulations for stablecoins. The EU’s regulations will be implemented beginning in June of that year. A measure to create a federal regulatory framework for stablecoins was approved by a House committee last month. This framework would include guidelines for the registration and licensing process for stablecoin issuers.
PayPal USD launched
Paxos Trust Co. will be responsible for issuing PayPal USD, the company’s stablecoin backed by U.S. dollar deposits and short-term U.S. Treasuries. PayPal users in the US will be able to access it gradually. PayPal’s stablecoin introduction is notable due to the company’s name recognition, according to Argus Research Corp analyst Stephen Biggar. However, the company’s history of involvement with cryptocurrencies makes this development less surprising. In addition, Visa (V.N) has stated that beginning in 2021, bitcoin settlements can be made using its payment network.
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