Paypal Launched USD Stablecoin: A Game-Changing Measure?
Payments giant $PayPal(PYPL)$ has announced the launch of a U.S. dollar stablecoin, making it the first major financial technology firm to adopt digital currencies for payments and transfers.
PayPal's stablecoin, named PayPal USD, is backed by U.S. dollar deposits and short-term U.S. Treasuries. It will be issued by Paxos Trust Co. and gradually rolled out to PayPal customers in the U.S.
The token can be redeemed for U.S. dollars at any time and used to purchase other cryptocurrencies available on PayPal's platform, including bitcoin.
This is the first stablecoin issued by a major financial company, which could drive the application of digital tokens in the payment sector.
Paxos, the issuing entity, noted, "PYUSD is the first of its kind, representing the next phase of U.S. dollars on the blockchain."
What are stablecoins? Is it a future trend?
Stablecoins, which are crypto tokens pegged to stable assets to reduce volatility, have been around for some time. However, they have not yet gained traction in mainstream consumer payments.
Instead, stablecoins are mainly used for trading other cryptocurrencies like bitcoin and ether. The largest stablecoin is Tether, followed by USD Coin issued by Circle. Previous efforts by mainstream companies to launch stablecoins were met with resistance from financial regulators and policymakers.
Last month, the U.S. House Financial Services Committee advanced a bill to establish a federal regulatory framework for stablecoins. The focus will be on rules for the registration and approval process for stablecoin issuers.
Representative Patrick McHenry, the committee's Republican chair, stated that PayPal's announcement signifies that stablecoins "hold promise as a pillar of our 21st-century payments system."
Follow-up of $PayPal(PYPL)$ ‘s latest earnings
PayPal shares slumped after the payments giant said a key measure of profits shrank in the second quarter as the cormpany had to set aside more money to cover souring loans it has made to meerchants
The stock plummeted 10% on the earnings release.
PayPal's adjusted operating margin narrowed to 21.4% in the secornd quarter from 22.7% in the first three months of the year. That missed the 22% guidance the company had previously provided.
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