PayPal launches a stablecoin. It is the first major financial institution that has delved into crypto payments, even as US regulators are increasing their scrutiny over digital assets.
PayPal USD is a stablecoin that has a dollar value. The San Jose company announced on Monday that it was expanding its digital currency services.
PayPal has made this move despite a crackdown on the unregulated crypto market by US regulators. In response to investor concerns and tough regulatory action, other companies have reduced their crypto activity in the country.
Revolut, a fintech company that specializes in cryptography, suspended its US activities last week. It cited “uncertainties about the crypto market” and became the latest group to leave the US.
Stablecoins, a type cryptocurrency, track the value of major currencies such as the US dollar. Stablecoins are a type of cryptocurrency that tracks the value of a major currency, such as the dollar, one-for-one.
PayPal offers trading in bitcoin and Ether, the two most popular crypto currencies, since 2020.
PayPal’s chief executive, Dan Schulman said: “The shift to digital currencies requires an instrument that is digitally native but also easily connectable to fiat currencies like the US Dollar.”
The traditional finance and technology firms have not made much progress in developing a crypto payment network that is widely used. Meta dropped its controversial Diem project last year, which included PayPal, Mastercard and other credit card providers.
Gautam Chhugani is a senior analyst at Bernstein who specializes in global digital assets. He said that digital asset payments have been restricted to crypto companies. However, for widespread adoption, “it needs to be available on a mainstream application, like PayPal”.
He said that there would be no fees for Mastercard or Visa, and the stablecoins would enable PayPal users to receive and send money without paying high fees.
Chhugani added, “If PayPal is successful then other payment apps and consumer financial service brands will want their own stablecoins.”
PayPal USD will be issued by Paxos which is regulated under the New York State Department of Financial Services. It can be redeemed one to one for US Dollars, according to the company.
In May last year, the market for stablecoins issued privately suffered a major setback when TerraUSD collapsed. This led to a crash in cryptocurrency prices as well as the failure of many digital asset companies. Do Kwon’s creator has been accused by US officials of eight criminal counts, including fraud. PayPal’s move is a direct threat to Tether and Circle which are the two most popular stablecoins.
The company said that the stablecoin reserves will be held in US dollars, short-term Treasuries, and other assets.
PayPal users will be able send payments online, make purchases and transfer stablecoins between their wallets. PayPal USD can be converted into other digital tokens, such as bitcoin and ether.
Post Disclaimer
The following content has been published by Stockmark.IT. All information utilised in the creation of this communication has been gathered from publicly available sources that we consider reliable. Nevertheless, we cannot guarantee the accuracy or completeness of this communication.
This communication is intended solely for informational purposes and should not be construed as an offer, recommendation, solicitation, inducement, or invitation by or on behalf of the Company or any affiliates to engage in any investment activities. The opinions and views expressed by the authors are their own and do not necessarily reflect those of the Company, its affiliates, or any other third party.
The services and products mentioned in this communication may not be suitable for all recipients, by continuing to read this website and its content you agree to the terms of this disclaimer.