The payments giant PayPal said it has launched a U.S. dollar stablecoin, making it the first major financial technology firm to do so. It will be backed by U.S. dollar deposits and short-term U.S. Treasuries, and will be issued by Paxos – the same institution which issued Binance’s ill-fated stablecoin.
It’s likely to get attention from regulators. Back in 2019, Facebook tried to launch a stablecoin but its plans were foiled after regulators raised concerns that it could upset global financial stability. (More on what went wrong here and how they tried to revive it here).
Some are hoping it could be different this time. There’s more crypto regulation now. The Republican chair of the U.S. House Financial Services Committee, which has recently advanced a bill to regulate stablecoins, said PayPal’s announcement indicates that stablecoins “hold promise as a pillar of our 21st century payments system.”
Crypto hasn’t exactly seen widespread adoption as a means of payment among ordinary consumers, but for those who are involved in the world of crypto trading, stablecoins are an essential way to store funds without being exposed to the volatility of most cryptocurrencies. There are an estimated $126 billion worth of stablecoins in circulation, according to CoinGecko, which makes them around 10% of the overall crypto market cap. (Want to know more about stablecoins? Click here for a Reuters introduction.)
The U.S. Federal Reserve set out this week that state banks who are members of the U.S. Federal Reserve system and want to engage with stablecoins have to demonstrate their risk management systems in order to get permission, after which they’ll be closely monitored. The Fed also said it’s creating a new supervisory program to oversee banks’ activities related to crypto.
Meanwhile, Coinbase’s trading volumes dropped to $92 billion in the second quarter of the year, compared to $217 billion a year ago. Still, it beat revenue estimates. It also said it expects to win its legal battle versus the SEC.
