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As it is known, PayPal will launch its own stablecoin, PYUSD, which is backed by the US dollar and runs on the Ethereum blockchain. However, according to Bank of America, this digital currency may not receive much attention in the near term.
In a note released Thursday, Bank of America analyst Alkesh Shah said that PYUSD has the potential to improve payment efficiency and customer experience, but it also faces several hurdles such as lack of wallet compatibility, currency trading pairs, regulatory clarity and new functionality.
“PYUSD adoption is unlikely to be substantial in the near term,” Shah wrote.
“Long term, we expect PYUSD to experience additional adoption issues as competition from central bank digital currencies and yield stablecoins increases.”
Shah argued that PYUSD does not offer many advantages over existing stablecoins with larger market shares and network effects, such as USDT and USDC. He also noted that PYUSD could face regulatory hurdles if non-banks are ultimately banned from issuing stablecoins, as proposed in a bill currently pending in Congress.
Moreover, Shah said that as interest rates rise and products with higher yields emerge in the crypto space, PYUSD may lose its appeal. He stated that investors may prefer stablecoins that generate returns from their assets, rather than those that do not provide returns such as PYUSD.
BofA Analyst Doesn't Expect PayPal's Stablecoin To Have Big Impact For The Cryptocurrency World
Shah stated that PYUSD will target a “largely untapped” market for blockchain-powered asset transfers, payments and remittances, rather than the trading market. As more people adopt digital currencies and more countries develop their own central bank digital currencies, this market could grow significantly in the future.
“We expect PayPal's PYUSD launch to deliver efficiency in payments and a better customer experience over time. However, we do not expect this to be a game changer for PayPal or the cryptocurrency industry in the near term.”
*Not investment advice.