PayPal adds new cryptocurrency to its value of one dollar

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PayPal adds new cryptocurrency to its value of one dollar

In an effort to increase its presence in the digital asset market, PayPal, the online payment firm, has added a new cryptocurrency to the value of one dollar. The new token, called a stablecoin, aims to maintain a $1 price, making it the first such offering by a major U.S. financial firm. Crypto investors can quickly process trades by exchanging tokens like bitcoin and ethereum for stablecoins, instead of using traditional financial intermediaries that can take days to settle transactions.

But stablecoins - an asset class worth about $120 billion, according to CoinMarketCap - have also raised alarms in Washington and flummoxed policymakers. In November 2021, the Treasury Department recommended Congress adopt a framework for the tokens and limit their issuance to banks, a potential risk to the broader financial system. But lawmakers have so far failed to approve the rules for stablecoins.

The Hong Kong-based Tether, issuer of the most widely traded stablecoin, said it would not abide by sanctions placed by the U.S. Treasury last year targeting a crypto service that allowed North Korean hackers and others to launder billions of dollars in stolen digital assets. The collapse of another stablecoin, TerraUSD, in May 2022, led to a surge of failures by other crypto firms that decimated the industry.

PayPal already allows users to purchase bitcoin and other crypto tokens and transact with them. The company added that customers will use stablecoin for payments in online games and in other Web3 applications and to send international payments.

Dan Schulman, PayPal's CEO, said in a statement.

PayPalUSD, a digital currency, will be available for $1. The company said that it will be fully backed by U.S. dollars, short-term government debt and other highly liquid assets.

The company teamed up with Paxos Trust, the company that issues the stablecoin of Binance's embattled cryptocurrency exchange, to issue the token. In February, the Wall Street Journal reported that the SEC had plans to sue Paxos for violating investor protection laws related to the token's sales, alleging that it was an unregistered security. The new York Department of Financial Services then ordered the company to stop issuing the token.

Paxos spokeswoman Julia Horowitz said the company would not comment on the matter.