PayPal’s new stablecoin is expected to target a market that remains largely untapped, according to the Bank of America.
Earlier this week, PayPal launched a USD-denominated stablecoin named PayPal USD (PYUSD).
PYUSD will be available to US-based PayPal customers, compatible with select third-party digital asset wallets and backed by traditional assets, analysts noted, including USD, short-term Treasuries and cash equivalents.
The launch makes PayPal the first global company to launch a stablecoin with regulatory approval.
Unsurprisingly, cryptocurrency stakeholders are excited by PayPal’s news.
RocketFuel Blockchain Inc (OTCQB:RKFL) CEO Peter Jensen called it “very good news for the industry.”
“Every time we have some of the large, established players, whether it's BlackRock, Fidelity or Schwab…it just proves the value and potential value that digital assets can provide to all of us,” Jensen told Proactive.
Stablecoins are tokens that are backed by low-risk and liquid assets, such as dollars and Treasuries, and aim to be redeemable at $1. These asset-backed stablecoins enable users to send and receive funds with fewer intermediaries, which allows for faster and cheaper settlement.
“We expect (PayPal’s) PYUSD launch to drive payments efficiencies and an improved customer experience over time, but PYUSD adoption is unlikely to be significant in the near term, given lack of wallet compatibility, exchange trading pairs or new functionality,” Bank of America analysts wrote in a note.
Bank of America noted that 88% of the global stablecoin market share is currently held by two companies - Tether (USDT) and Circle (USDC).
Tether is primarily used for trading and to transfer funds between exchanges and wallets, but PayPal customers are likely less focused on trading than Tether's, analysts highlighted.
And if Tether’s second quarter 2023 profit of $850 million is an indication, there is a significant revenue opportunity driven by interest income from the assets backing a stablecoin.
Unsurprisingly, companies like RocketFuel are working hard on adding PYUSD to their offerings.
“As soon as it's rolled out, we will support it,” CEO Jensen said.
“I do believe that there's going to be a market for it. Usually, we wait to see adoption, because if nobody's using it, we don't need to support it – but I have a pretty good feeling that a lot of people will be using this.”
Contact Angela at angela@proactiveinvestors.com
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