Online payments firm PayPal (PYPL) says it plans to launch a U.S. dollar-pegged stablecoin that is based on the cryptocurrency Ethereum (ETH).
The company said its Ethereum-based stablecoin will soon be available to PayPal users in the U.S. It is the first time that a major financial company is issuing its own stablecoin.
Going forward, users will be able to transfer the “PYUSD” stablecoin between PayPal and supported external digital wallets, use the token to pay for goods and services, and convert any of PayPal's supported cryptocurrencies into the new digital token.
PayPal said the stablecoin is being designed so that it can be easily adopted by cryptocurrency exchanges around the world.
The PYUSD stablecoin will also be issued by New York-based cryptocurrency financial services firm Paxos Trust and will be fully backed by U.S. dollar deposits, short-term Treasuries, and similar cash equivalents.
Owners of the stablecoin will also be able to redeem it for dollars and it can be exchanged for other cryptocurrencies available on PayPal’s network such as Bitcoin (BTC) and Litecoin (LTC).
PayPal added that it plans to provide attested reports of the funds backing its new stablecoin to alleviate regulatory concerns about unbacked digital tokens.
PayPal announced its new PYUSD stablecoin after issuing disappointing second-quarter financial results.
The company’s stock has declined 37% over the last 12 months to trade at $62.02 U.S. per share.
