US-based financial technology company PayPal has introduced its first US dollar-denominated stablecoin PayPal USD that can be used for payments and transfers.

PayPal USD is fully backed by US dollar deposits, short-term US treasuries and similar cash equivalents, and can be redeemed 1:1 for US dollars.

It is issued by Paxos Trust, a fully licensed financial institution and technology company, under the supervision of the New York State Department of Financial Services (NYDFS).

In the coming few weeks, eligible PayPal customers in the US will be allowed to purchase and transfer the PayPal USD between PayPal and compatible external wallets.

PayPal USD can be used for person-to-person payments, and fund purchases at checkout, and can be converted into any PayPal’s supported cryptocurrencies.

The US financial technology company said that its first stablecoin will be offered to consumers, merchants and developers to help connect fiat and digital currencies.

PayPal president and CEO Dan Schulman said: “The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the US dollar.

“Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.”

The only stablecoin within the PayPal network, PYUSD leverages the company’s experience in payments, together with speed, cost, and programmability of blockchain protocols.

PYUSD is an ERC-20 token issued on the Ethereum blockchain, offered to a large and growing community of external developers, wallets and web3 applications.

It can be easily adopted by exchanges and will be deployed to enhance experiences within its payment ecosystem, said PayPal.

The stablecoin is designed to reduce friction for in-experience payments in virtual environments and facilitate fast transfers of value to support friends and family.

It also enables remittances or international payments, direct flows to developers and creators, and continued expansion into digital assets by large brands.

In June last year, PayPal received a BitLicense from the NYDFS, following a conditional BitLicense.