PayPal Launches Stablecoin to Expand Presence in the Cryptocurrency Market

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PayPal Launches Stablecoin to Expand Presence in the Cryptocurrency Market

Paraphrased Text: PayPal, a leading online payments company, has introduced a stablecoin linked to the value of one dollar as a strategic move to solidify its position in the digital asset market. This stablecoin, designed to maintain a price of $1, is the first offering of its kind from a prominent American financial institution. By enabling crypto investors to trade quickly and exchange cryptocurrencies like bitcoin and ethereum for stablecoins, PayPal eliminates the need for traditional financial intermediaries, which typically take several days to settle transactions.

Despite stablecoins being valued at approximately $120 billion, according to CoinMarketCap, concerns have been raised in Washington, with policymakers facing difficulties in understanding and regulating this asset class. In November 2021, top financial regulators, led by the Treasury Department, proposed that Congress establish a framework for stablecoins and restrict their issuance to banks due to potential risks to the broader financial system. However, lawmakers have yet to approve any rules governing stablecoins.

In contrast, Tether, a Hong Kong-based company responsible for the most widely traded stablecoin, announced its non-compliance with the sanctions imposed by the Treasury Department. These sanctions were aimed at a crypto service that facilitated money laundering involving North Korean hackers, resulting in the theft of billions of dollars in digital assets. The collapse of another stablecoin, TerraUSD, in May 2022 triggered a series of failures among other crypto firms, severely impacting the industry.

PayPal already enables users to purchase bitcoin and other cryptocurrencies while performing transactions. According to the company, customers are expected to utilize its stablecoin, named PayPal USD, for various purposes, such as making payments in online games, engaging with Web3 applications, and facilitating international transfers. PayPal CEO Dan Schulman expressed confidence in this venture and stated that the stablecoin will be redeemable for $1, backed by U.S. dollars, short-term government debt, and other highly liquid assets.

To establish this token, PayPal partnered with Paxos Trust, the same firm responsible for issuing the stablecoin of embattled crypto exchange Binance. In February, the Securities and Exchange Commission revealed its intention to sue Paxos for allegedly violating investor protection laws by selling the token as an unregistered security. Subsequently, the New York Department of Financial Services instructed the company to halt the issuance of the token, as confirmed by Paxos spokeswoman Julia Horowitz.