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What does the PayPal coin mean for the crypto space?

3 min read

The crypto year 2022 starts with a bang. As we reported on January 10th, PayPal is working on its own stablecoin. The head of department for crypto and digital currencies at PayPal, Jose Fernandez Da Ponte, confirmed such a commitment after an IT analyst found evidence of it in the source code of the PayPal app.

Exact information on a possible “PayPal Coin” is not yet available. Experts now consider it certain that the stablecoin will come. One of them is Philipp Sandner, head of the Frankfurt School Blockchain Center

Sooner or later it had to come. You can see that blockchain infrastructures like ETH work well when it comes to mapping stablecoins. There are already some US dollar stablecoins that also meet certain regulatory requirements and that already have daily transaction volumes of 100 billion US dollars. Against the background, it is clear that companies such as Visa, Mastercard and now PayPal are dealing with the issue, simply so as not to lose touch.

The PayPal network currently has to deal with a large number of administrative processes in the background. In the opinion of the economist, the launch of its own stablecoin would result in a “huge advantage” for the payment service provider, since transaction processes would be made significantly more efficient using blockchain technology.

New competition for Tether and Circle?

Jonas Gross is a little more reserved. The chairman of the Digital Euro Association generally assumes an increase in efficiency, but details still have to be clarified.

In order to be able to evaluate PayPal’s step in a well-founded manner, details are currently lacking: For whom will this stablecoin be available? For PayPal users only or for everyone? What are the benefits for end users? How expensive are transactions?

This ultimately also shows the extent to which established stablecoin projects such as Tether or Circle have to fear a new competitive situation, adds Gross. In any case, it won’t be easy.

It is not the first foray that PayPal has ventured into the crypto space. At the end of March last year, the payment service provider gave its US customers access to four selected crypto currencies, including the key currency BTC. In July, the service was expanded to include Great Britain, with other countries to follow. PayPal is now taking the next step with its own stablecoin.

“PayPal Coin should initially be launched in the USA”

With regard to the regulatory framework, Sandner believes in a launch of the PayPal coin in the USA. The past has already proven that the United States is the preferred entry country here.

It could get more difficult in Europe. There are two reasons for this: firstly, there are negative interest rates in the euro area. Someone who issues a Euro stablecoin would therefore be working unprofitably. Second, there is the MiCA regulation, which raises the hurdles for offering stablecoins.

However, the economist does not see a real competitive disadvantage for the euro area. “In the long term, this may mean that the euro will become latently less important as a world currency. For me, however, it is not necessarily a disadvantage that the cryptocurrency sector is dominated by the US dollar.”

What do interest rate hikes in the euro area mean for BTC?

All content in this article is for informational purposes only and in no way serves as investment advice. Investing in cryptocurrencies, commodities and stocks is very risky and can lead to capital losses.

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