PayPal, The First Major Fintech To Unveil Dollar-Backed Stablecoin

CIOTechOutlook Team | Tuesday, 08 August 2023, 05:19 IST

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Payments behemoth PayPal announced that it has introduced a U.S. dollar stablecoin, making it the first significant financial technology company to accept digital currencies for transfers and payments. Stablecoins have been around for a while, but they haven't quite managed to break into the main stream ecosystem for consumer payments. Their value is anchored to a stable asset to defend against uncontrolled fluctuation.
 
PayPal, which increased its shares by 2.5% in afternoon trade, represents a vote of confidence in the struggling sector. Over the last year, this sector has struggled with regulatory challenges that were made worse by a number of high-profile failures. Stablecoin launches by large, well-known corporations in the past have been faced 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 provide a federal regulatory framework for stablecoins, with a particular emphasis on guidelines for the registration and licensing process for stablecoin issuers, was also advanced last month by the U.S. House Financial Services committee.
 
The PayPal USD stablecoin, which will be issued by Paxos Trust Co., is backed by short-term U.S. Treasury bonds and deposits in dollars. American PayPal users will progressively be allowed to access it. PayPal's brand recognition makes the stablecoin debut noteworthy, according to Argus Research Corp analyst Stephen Biggar, but the corporation has already been linked to cryptocurrencies, so it's not surprising.
 
Additionally, Visa stated that starting in 2021, cryptocurrencies will be accepted as a form of payment on its payment network.
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