Bank of America: PayPal’s Stablecoin Will Face Limited Adoption

Paigambar Mohan Raj
Source: PayPal NewsRoom

According to a report by the Bank of America (BoA), PayPal’s new stablecoin, PYUSD, is unlikely to see a lot of adoption in the near term. Moreover, in the long term, PYUSD may face competition from CBDCs (central bank digital currencies) and yield-bearing stablecoins. Despite the bearish outlook, the bank mentioned that PayPal’s PYUSD will increase payment efficiency. The bank added that the platform will also offer an improved customer experience.

Also Read: How to Purchase $PYUSD on PayPal

As per the report by analysts Alkesh Shah and Andrew Moss, investors are indifferent to which stablecoin they hold. This perception stems from the notion that stablecoins are considered safe and accessible on large platforms. The report highlighted,

“Investors may have been fine holding non-yield bearing stablecoins such as Tether (USDT) and USD Coin (USDC) when rates were close to zero. Yield-bearing stablecoins will likely become increasingly available and attractive with short-term rates above 5%.”

Will PayPal’s stablecoin bring regulatory change?

PayPal Bitcoin BTC

Bank of America doesn’t foresee PYUSD’s launch causing faster regulatory clarity. The report also noted that stablecoin’s issuance “does not alter systemic risk for traditional markets.” However, the platform could face regulatory issues if authorities ban non-banks from issuing stablecoins.

Additionally, the U.S. Federal Reserve recently issued a warning to banks regarding their work with PayPal and its PYUSD stablecoin. According to former SEC Chair John Reed Stark, the Fed is currently enacting an “unprecedented financial regulatory onslaught against all things crypto.”

The Bank of America report also stated that PYUSD will most likely target a market that has so far remained untapped, i.e., the “blockchain technology-enabled asset transfers, payments, and remittances” sector. Nonetheless, PayPal is the first major financial company to enter the stablecoin and crypto sectors, which is a testament to the growing popularity and demand of the industry.

Also Read: Federal Reserve Issues Warning Over New PayPal Stablecoin