PayPal launches digital token in push to capture crypto payments

The online payments company is the first major U.S. financial institution to create its own stablecoinThe PayPal office building in Berlin. (Fabrizio Bensch/Reuters)PayPal, the online payments giant, has a new cryptocurrency pegged to the value of a dollar in a bid to strengthen its foothold in the digital asset market.The new token, known as a stablecoin because it aims to maintain a $1 price, is the first such offering from a major U.S. financial firm. Crypto investors can quickly process trades by exchanging tokens such as bitcoin and ethereum for stablecoins, rather than using traditional financial intermediaries that can take days to settle transactions.But stablecoins — an asset class worth roughly $120 billion, according to CoinMarketCap — have also raised alarms in Washington and flummoxed policymakers. Top financial regulators led by the Treasury Department in November 2021 recommended that Congress adopt a framework for the tokens and limit their issuance to banks, citing potential risk to the broader financial system. But lawmakers so far have failed to approve rules for stablecoins.The cryptocurrency, dubbed PayPal USD, will be redeemable for $1. The company said it will be fully backed by U.S. dollars, short-term government debt and other highly liquid assets.To issue the token, the company partnered with Paxos Trust, the same firm that issues the stablecoin of embattled crypto exchange Binance. In February, the Wall Street Journal reported that the Securities and Exchange Commission planned to sue Paxos for violating investor protection laws related to sales of the token, alleging it was an unregistered security. The New York Department of Financial Services then directed the company to stop issuing the token.PayPal referred a request for comment on the matter to a Paxos spokesperson, who said the company believes its stablecoins are “unequivocally not securities.”“Blockchain will transform financial services and Paxos will lead that transformation by providing global enterprises with safe, compliant and regulated infrastructure solutions,” Paxos spokeswoman Julia Horowitz said.$BTC $ETH #PayPal #bitcoin #cryptocurrency