As the newest addition to its portfolio of cryptocurrency services, PayPal debuted a stablecoin backed by the dollar on Monday to aid with payments. It’s the first such action by a significant American financial institution.
It was created to address the “emerging potential” to “transform payments in web3 and digitally native environments.” The new asset is known as PayPal USD (PYUSD). Its release coincides with market players waiting for Congress to vote on a crucial stablecoin law, which has just made its way to the House together with three other cryptocurrency proposals for the first time.
According to PayPal, the stablecoin’s purpose is to lower transaction costs for novice users making payments in virtual environments and to enable direct developer payments. It is convertible into dollars and backed by short-term U.S. Treasury bonds and other similar cash equivalents.
Dan Schulman, president and chief executive officer of PayPal, stated that the transition to digital currencies “requires a stable product that is both digitally native as well as easily connected to physical currencies like the U.S. dollar.” “The foundation required to contribute to the increase in digital payments through PayPal USD is provided by our commitment to ethical innovation and compliance, as well as our track record of bringing new experiences to our customers.”
Shares of PayPal increased by more than 1% after the news.
Cryptocurrencies known as stablecoins have their pricing tied to an underlying asset. Although there are stablecoins whose prices are tied to commodities or other financial assets, it is often a fiat currency, usually the U.S. dollar.
Paxos, which previously released the dollar-pegged, Binance-branded stablecoin BUSD, is the company that issues PayPal USD. The New York State Department of Financial Services ordered Paxos to halt issuing BUSD in February, which started the stablecoin market cap’s drop this year.