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

PayPal's shares rose 1.4% to $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 United States, the digital payments firm said.

Last month a U.S. 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. (Reporting by Jaiveer Singh Shekhawat in Bengaluru; Editing by Nivedita Bhattacharjee and Shounak Dasgupta)