California(USA), 08/08/23: Elon Musk, Peter Thiel, Yu Pan, and others formed the payments behemoth PayPal, which declared on Monday that they were creating a stablecoin tethered to the dollar.
PayPal is becoming the first significant financial technology company to accept payments in and transfers using digital currencies. The company’s shares increased by 2.66 percent as a result of the announcement.
Since a few years ago, there have been stablecoins, a sort of cryptocurrency that ties its value to a reliable asset in order to reduce volatility.
They primarily operate as a means of trading other cryptocurrencies like Bitcoin and Ethereum but have yet to make a substantial impact on mainstream consumer payments. The most popular stablecoin currently is Tether, which is followed by Circle’s USD Coin.
PayPal’s stablecoin, known as PayPal USD, will be released by Paxos Trust Co. and will be backed by short-term U.S. Treasury bonds and dollar deposits. It will only gradually become available to PayPal users in the US.
One benefit of this stablecoin is that it can be exchanged for dollars at any time and that it may be used to make it easier to purchase and sell Bitcoin and other cryptocurrencies available on PayPal’s platform.
Major mainstream firms have attempted to offer stablecoins in the past, but they have run into opposition from financial regulators and legislators. The introduction of Libra, a stablecoin, by Meta was postponed in 2019 due to worries about possible alterations to the integrity of the world’s financial system.
With the EU’s rules slated to go into force in June 2024, several major economies, notably the European Union and Britain, have lately adopted legislation to oversee these digital assets in response to the growing interest in stablecoins.
eBay had purchased PayPal in 2002 for $1.5 billion in shares. With an 11.72 percent ownership stake, Musk is one of the company’s founder and the largest shareholder, he had received $175.8 million from the buyout back in 2002.
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