(Aug 7): Payments firm PayPal on Monday (Aug 7) launched a US dollar stablecoin in a bid to boost the adoption of digital currencies for payments and transfers.

The stablecoin, known as PayPal USD, is backed by US dollar deposits and short-term US Treasuries, and will be issued by Paxos Trust Co, according to the company.

PayPal's shares rose 1.4% to US$63.66.

Stablecoins are cryptocurrencies designed to be protected from the wild volatility that makes it difficult to use digital assets for payments or as a store of value.

PayPal USD is pegged to the dollar and will gradually be available to the company's customers in the US, the digital payments firm said.

Last month a US congressional committee failed to come to an agreement on a bill to establish a federal regulatory framework for stablecoins.

Visa had said in 2021 that it will allow the use of the cryptocurrency USD Coin to settle transactions on its payment network.