With PayPal (NASDAQ:PYPL) reportedly preparing to launch its cryptocurrency, some investors might be wondering what a stablecoin is.
Luckily for them, we’ve got them covered with a complete breakdown of stablecoins below!
- Stablecoins are a type of cryptocurrency that are typically backed by a reserve asset.
- This has them attempting to mimic the stability that fiat currencies have.
- That means that many stablecoins use the U.S. Dollar as their reserve asset.
- This has the price of the stablecoin roughly correlating to the USD.
- However, not all stablecoins go this route.
- Some creators of stablecoins instead use a different cryptocurrency as their reserve asset.
- There’s also a third type of stablecoin that isn’t backed by any reserve asset.
- These stabelcoins instead use algorithms to keep the price stable.
- This mimics the same way a central bank would operate to minimize price fluctuations in a fiat currency.
- A few examples of popular stable coins include USD Coin (CCC:USDC-USD), Binance USD (CCC:BUSD-USD), and Dai (CCC:DAI-USD)
- Keeping all of that in mind, PayPal appears to be working on its own crypto called PayPal Coin.
- While it hasn’t been officially revealed yet, some sneaky sleuths found evidence of the crypto in the company’s iPhone app.
- We also know that PayPal wants to work with regulators before putting out its own cryptocurrency to avoid any potential legal pitfalls.
PYPL stock is down 4.6% as of Monday afternoon.
Investors looking for more stock and crypto news will want to keep reading!
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On the date of publication, William White did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.