What will PayPal’s new stablecoin mean for crypto?

After PayPal announced it will release a dollar-pegged crypto stablecoin, we look at what this could mean for the future of crypto

PayPal recently announced it will be launching its own dollar-pegged crypto stablecoin, arguably making it the first universally-known financial institution to have a crypto offering. 

Called PayPal USD, the cryptocurrency will be issued by Paxos Trust Co and be fully backed by US dollar deposits, cash equivalents and short-term treasuries. 

The large financial player will begin slowly rolling its new stablecoin out to customers in the US. 

Paypal: Cementing market dominance 

The move comes in an attempt to sure up PayPal’s dominance in the financial services sector, by creating a digital asset that enables lower-cost and instant and transfers without a central intermediary.

On the launch of PayPal USD, PayPal President Dan Schulman says: “The vision over time is that this becomes a part of the overall payments infrastructure.”

It may just be what PayPal needs too, after seeing a 33% slump in share price over the last year following a dip in pandemic-fuelled online payments. 

What does PayPal’s stablecoin mean for crypto? 

While PayPal may have its own reasons for launching PayPal USD, its launch may also have long-lasting effects on the future adoption rates of crypto. 

This is an established, largely trusted financial institution for money transferring, so will its adoption of crypto spur consumer interest in digitally-traded assets? 

Chief Legal Officer at Sumsub, Tony Petrov, comments: “PayPal’s news is a testament to the burgeoning popularity of DeFi. This and the remarkable milestone of stablecoins surpassing US$100bn in market value, according to recent reports, highlight its pivotal role as a bridge between digital and fiat currencies. 

“This rapid ascent signals a major transformation in the cryptocurrency ecosystem, and the potential impact of stablecoins on the global financial landscape is an exciting development to monitor closely.”

As far as Petrov is concerned, the launch of PayPal’s stablecoin may spur further financial providers to offer a similar crypto-traded asset, particularly after regulatory changes in the UK.  

He adds: “The Financial Action Task Force (FATF) now categorises stablecoins as Virtual Assets (VAs) or traditional assets, recognising their increasing impact on the financial sector. 

“Consequently, providers of stablecoin-related services must adhere to Anti-Money Laundering (AML) regulations to uphold transparency and accountability standards - in the UK, regulations will come into force from September 1, 2023.

“Not following this rule could lead to fraud by not detecting suspicious users, fines, and also significant reputational damage for crypto businesses. 

“Firms must prioritise having crypto transaction monitoring tools in place, as well as comprehensive AML compliance and verification processes both during and following onboarding.”

AssetPass Co-founder and CEO, Paul Rossini, also comments: "PayPal’s announcement of the launch of US-backed stablecoin shows how the digital currency trend shows no signs of waning. And it’s somewhat of a watershed moment as PYUSD is to be the first regulated stablecoin from a global payments company.

"Stablecoins are designed to hold steady, to provide a value that doesn’t fluctuate, and this particular currency has greater regulation than others, so the launch will likely sway more individuals to engage with digital currencies - but one of the biggest challenges companies and the public face, is going to be securely managing access to such assets.

“We’ve all heard the horror stories of people being completely locked out of their digital wallets. But the rising concern is not just about access management by the owner themselves, but how their beneficiaries can access inheritance in digital currencies.

“Unlike traditional banking institutions, there is no process for the handover of these accounts to the beneficiaries if they don’t have access to the original passwords – which may not be handed over in the instance of an untimely death or incapacitation.

"This is proven by the millions of Bitcoins lying idle in inaccessible wallets, a notable portion belongs to wallet holders that passed away without sharing their passwords. Without a secure and seamless solution to this issue, the value and potential for digital currencies to become mainstream will be severely undermined.”

 So, where does crypto go from here? The signs look good for increased adoption, but, as with all things, only time will tell. 

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For more insights from FinTech Magazine, you can see our latest edition of FinTech Magazine here, or you can follow us on LinkedIn and Twitter.
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