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Bank of America's recent research report suggests that while the introduction of PayPal's stablecoin, known as PayPal USD (PYUSD), is poised to enhance payment efficiencies and elevate the overall customer experience, its immediate widespread acceptance as a cryptocurrency might not be substantial.
“Over the longer term, we expect PYUSD to experience additional adoption headwinds as competition from central bank digital currencies (CBDCs) and yield-bearing stablecoins increases,” analysts Alkesh Shah and Andrew Moss wrote. A stablecoin is a type of cryptocurrency whose value is pegged to another asset, typically the U.S. dollar.
“Investors may have been fine holding non-yield bearing stablecoins such as Tether (USDT) and USD Coin (USDC), when rates were close to zero, but yield-bearing stablecoins will likely become increasingly available and attractive with short-terms rates above 5%,” the analysts wrote.
Earlier this week, the prominent payments company announced its foray into the cryptocurrency realm by introducing its very own dollar-anchored stablecoin named PayPal USD. This marks a groundbreaking milestone as the initial endeavor of a major financial corporation into this domain. Built on the Ethereum platform, this token will initially be accessible on the PayPal platform, followed by Venmo. Notably, it retains the flexibility to be converted into dollars at will.
The report stated that investors probably don't have a strong preference for specific stablecoins they possess, as long as these stablecoins are considered “safe and accessible on the largest trading platforms.”
Bank of America says it doesn’t expect PYUSD’s launch to lead to “accelerated regulatory clarity” because the stablecoin’s issuance “does not alter systemic risk for traditional markets,” but it could face regulatory hurdles if nonbanks are ultimately banned from issuing stablecoins.
PYUSD is poised to focus on a market that has predominantly been overlooked until this point, encompassing areas such as “blockchain technology-enabled asset transfers, payments and remittances,” as outlined in the report.
Source Coindesk
