When PayPal (PYPL) announced the launch of a US dollar-backed stablecoin, it became the first fintech to embrace digital currencies. This expands payments and transfers and ultimately lifts the cryptocurrency industry.
In 2019, Facebook, now known as Meta Platforms, tried to launch Libra, a stablecoin. Regulators did not support Libra because they thought it would destabilize the current global financial system.
PayPal needs to convince regulators that its new stablecoin is not Facebook’s Libra. It will peg this stablecoin to the U.S. dollar. It will be an Ethereum-based token that customers may use for online payments. PayPal allowed its customers starting in May 2023 to transfer any cryptocurrencies to third-party wallets.
PayPal’s PYUSD is not likely to disrupt Tether. Tether is not in the U.S. market, while PYSD is. Conversely, USDC (or USD Coin), is losing market share. Its market capitalization is $26.1 billion, down ever since Silicon Valley Bank collapsed. Circle held a portion of its USDC reserves in Silicon Valley Bank.
Positive Impact
PayPal’s support for cryptocurrency-based transactions on its platform benefits the crypto industry as a whole. The larger player will welcome regulation, which increases crypto legitimacy.
Stock investors should continue to avoid PayPal stock. Instead, watch stablecoin volumes rise while ethereum and bitcoin prices stabilize.
