On Monday, PayPal unleashed a dollar-pegged stablecoin to its crypto services suite, becoming the first major financial institution in the U.S. to make such a move. Dubbed PayPal USD (PYUSD), the token was designed to facilitate faster payments within the virtual environment, allowing for a smoother flow for developers. It is redeemable for dollars and is backed by cash equivalents such as dollar deposits and short-term U.S. Treasurys.Dan Schulman, president and CEO of PayPal, noted that this development, while part of an ever-evolving digital currency landscape, necessitated a "stable instrument" which could also be closely tied to traditional fiat money like the U.S. dollar. Shares of PayPal rose by 2% in reaction to the news.This stablecoin is issued by Paxos, a PayPal brokerage partner for its crypto buying and selling services. Paxos had also previously released the Binance-branded, dollar-backed BUSD - something that drew a cease-and-desist order from the New York State Department of Financial Services in February, which kickstarted a decrease in the stablecoin market cap.The announcement of the PayPal stablecoin comes soon after the House of Representatives had put forth a stablecoin bill for consideration.The holiday season is fast approaching.
The holiday season is drawing near.
Since the start of the year, the market capitalization for USD Coin (USDC) - the most prominent U.S. company issued dollar-pegged stablecoin - has declined by 41%, according to CryptoQuant. Managed by a tech consortium named Centre, which is founded by Circle and includes cryptocurrency exchange Coinbase, stablecoins are (crypto)currencies with prices tightly linked to a particular asset. While these digital currencies do not have the same volatility of other virtual assets, the crypto industry as a whole has experienced increased scrutiny from regulators and the ongoing banking crisis this year, meaning USDC was not successfully circumvent the impacts. To trade swiftly and cheaply in and out of other digital assets (e.g. Bitcoin and Ether) without entering the traditional finance system, traders frequently use stablecoins.
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