Bank of America: PayPal’s Stablecoin (PYUSD) Launch Expected to Enhance Efficiency, but Near-Term Adoption Unlikely

Bank of America: PayPal’s Stablecoin (PYUSD) Launch Expected to Enhance Efficiency, but Near-Term Adoption Unlikely

Crypto News – In a recent research report, Bank of America analysts Alkesh Shah and Andrew Moss discussed the implications of PayPal’s introduction of its stablecoin, PayPal USD (PYUSD). While acknowledging the potential for increased payments efficiency and an improved customer experience, the report suggests that the initial adoption of this cryptocurrency might not be substantial in the short term.

The analysts projected that PYUSD could encounter challenges in garnering widespread adoption over time, as it faces competition from central bank digital currencies (CBDCs) and other yield-bearing stablecoins. These yield-bearing stablecoins, the report notes, could become more appealing as short-term interest rates rise above 5%, potentially drawing investors away from non-yield bearing stablecoins like Tether (USDT) and USD Coin (USDC).

PayPal’s landmark entry into the crypto market was highlighted as it unveiled its Ethereum-based stablecoin, which is set to be accessible through both PayPal and Venmo platforms. The stablecoin will be pegged to the U.S. dollar and can be exchanged for fiat currency at any given moment.

The report suggests that investors are likely to prioritize stablecoins that are perceived as secure and available on major trading platforms, regardless of the specific stablecoin type they hold. Bank of America anticipates that the launch of PYUSD will not necessarily expedite regulatory clarity, as the stablecoin’s issuance is not believed to significantly alter systemic risks in traditional markets. However, potential regulatory obstacles might arise if nonbank entities are prohibited from issuing stablecoins.

PYUSD is expected to target a relatively untapped market segment, encompassing activities such as blockchain-powered asset transfers, payments, and remittances, according to the report. While acknowledging the potential of PYUSD, the analysts point out that its adoption trajectory might be influenced by factors such as evolving regulatory landscapes and competition from other emerging digital currencies.