PayPal becomes first major fintech firm to launch dollar-backed stablecoin

PayPal announced on Monday that it has launched a US dollar stablecoin. It has become the first major fintech company to embrace digital currencies for payments and transfers. This milestone has been realized even as US regulators remain strict on digital assets.

PayPal’s stablecoin

The latest move by PayPal in its effort to advance its offerings is the launch of a US dollar-denominated stablecoin known as PayPal USD. The fintech firm has expanded into this sector after allowing for trading in bitcoin and ether since 2020.

PayPal’s chief executive, Dan Schulman stated, “The shift towards digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the US dollar”.

With the exclusion of third parties, PayPal users will be able to send and receive funds with reasonable fees. PayPal USD will be issued by Paxos, which is regulated by New York State Department of Financial Services. The stablecoin will be redeemable one-to-one for the greenback.

Besides, the stablecoin’s reserves will be held in dollar deposits, short-term Treasuries and other assets. The company’s customers can transfer the stablecoin between their wallets as well as to external wallets. This also includes sending payments to loved ones and making online purchases. It will also be possible for one to convert the stablecoin to bitcoin and ether, which are the other digital tokens supported by the fintech company.

Interestingly, PayPal’s expansion in the crypto world comes at a time when US regulators continue with aggressive crackdown on unregulated activities within the sector. Indeed, several companies have pulled back from their involvement in the crypto market.

For instance, fintech company - Revolut announced last week that it has suspended its US crypto activities. It attributed the move to the “uncertainties around the crypto market in the US”. Besides, Meta abandoned its Diem stablecoin project in 2022 citing the US regulators’ aggressive scrutiny.