PayPal Inches Closer to Launching its very own Stablecoin
There’s been plenty of news in recent weeks on stablecoins. Late last year, Visa stated that “stablecoins might become the medium of exchange rather than cryptocurrencies”. The announcement came following Visa’s launch of its crypto advisory service.
Stablecoins are virtual currencies. Unlike cryptos such as Bitcoin (BTC) and Litecoin (LTC), the values are pegged to traditional assets. These can include the U.S Dollar, in the case of USD Tether (USDT) or even gold in the case of gold-backed Paxos Gold (PAXG) stablecoin.
What is PayPal and its Stablecoin Plans?
PayPal Holdings Inc. (PYPL) is a U.S financial tech company that operates a global online payments system. The platform enables users to send and receive money and make online payments.
Launched in 1998, PayPal Holdings Inc. is listed on the NASDAQ and had a reported revenue of $21.45bn in 2020.
In response to the greater adoption of cryptos, PayPal entered the crypto space in late 2020. PayPal has more than 377 million users worldwide. In spite of this, it reportedly took 7-years to move from concept to product.
Following the successful entrance of PayPal into the crypto space, it may take much less time for PayPal’s stablecoin to become a virtual reality.
Overnight, news hit the wires of PayPal planning to launch its own PayPal Coin backed by the U.S Dollar. The report highlights that “evidence of PayPal’s exploration into building its own stablecoin was first discovered in the company’s iPhone app by developer Steve Moser”.
It remains unclear, however, how close PayPal is to an actual launch of PayPal Coin. According to a Bloomberg report, PayPal’s senior VP of crypto, Fernandez Da Ponte, had said that an “appropriate stablecoin purpose-built for payments had yet to be identified”. He added that “the appropriate stablecoin would need to support payments at scale and have security”. PayPal would reportedly also need “to have clarity on regulation, the regulatory frameworks, and the required type of licenses”.
Regulation Seen as a Hurdle for Stablecoins
Late last year, the views of Fitch Ratings on regulation and stablecoins had hit the news wires. Fitch Ratings sees greater regulatory certainty over the status of stablecoins and their users as a market positive. Regulatory risk, that has hit the broader crypto market at the turn of the year, has reportedly “deterred many financial institutions from engaging with stablecoin operators”. Late last year, we had discussed the possible negative impact of regulator chatter and activity on the crypto market. An appropriate global regulatory framework, which is neither punitive nor lax, however, would likely support cryptos and stablecoins in particular. As Fitch Ratings points out, regulatory certainty will be key.