(Reuters) -Swedish fintech firm Klarna ( KLAR ) on Tuesday said it will launch a U.S. dollar-backed stablecoin, becoming the latest major payments company to move deeper into digital assets as regulators tighten oversight of the sector.

The token, called KlarnaUSD, is currently in testing and will be available on the mainnet in 2026, will be fully backed by the U.S. dollar the company said.

Stablecoins are cryptocurrencies whose value is tied to traditional money, and they have surged in use in recent years as traders seek a relatively steady asset to move funds between more volatile tokens.

Klarna ( KLAR ) said it aims to position KlarnaUSD for everyday payments and cross-border transactions, pitching it as a faster and cheaper alternative to conventional banking.

The buy-now-pay-later company, one of Europe's largest fintech firms, has its biggest user base in the United States.

The stablecoin will run on Tempo, a payments-focused blockchain developed by Stripe and crypto investment firm Paradigm.

Bigger rival PayPal ( PYPL ) launched its own U.S. dollar token, followed by peer Stripe's launch of a stablecoin after its $1.1 billion acquisition of crypto firm Bridge earlier this year.

These moves come as regulators in the U.S. and Europe advance new rules for digital assets. Klarna ( KLAR ), like other stablecoin firms, is expected to benefit from frameworks such as the GENIUS Act in the U.S. and MiCA in Europe.

"Crypto is finally at a stage where it is fast, low-cost, secure, and built for scale. This is the beginning of Klarna ( KLAR ) in crypto," CEO Sebastian Siemiatkowski, a once vocal crypto skeptic, said in a statement.

Klarna ( KLAR ) last week beat analysts' revenue expectations in its first quarterly report since a blockbuster stock market listing in September.