PayPal's stablecoin launch could end the Crypto Winter

A week that has underscored a summer of soaring temperatures and devastating wildfires is a tragically ironic moment to signal the end of the so-called Crypto Winter.

Paypal’s new stablecoin PYUSD, which launched Monday, could provide a final and much-needed shift for the crypto industry away from its days of frenzied, rampant financial speculation and utopian promises, into a more sedate but globally significant payments use case.

Critics common question is simply 'what are they for?'

Bank of America's head of digital assets Alkesh Shah, argues asset-backed stablecoins "enable users to send and receive funds with fewer intermediaries, which enables faster and cheaper settlement."

PYUSD, which claims to be fully anchored by U.S. dollar deposits, US Treasuries, and other equivalent assets, caught so much attention this week for the simple reason it is the first major US financial company-backed stablecoin. 

It could very well serve as a catalyst for more widespread acceptance and usage of stablecoins.

PayPal, founded more nearly a quarter century ago is fintech’s original disruptive success story and now counts and sustains about c.430 million active users, according to Statista. About 90 per cent of these are individuals and the rest are merchants. PayPal-owned Venmo has a further 70 million users.

With such huge reach, scale and clout such as a move is one to take note of.

The sheer audacity of introducing a major US financial company-backed stablecoin breaks new ground, yet it also adds a layer of complexity to the ongoing narrative of cryptocurrencies.

"With a behemoth like PayPal stepping into the scene, the landscape could change drastically. PayPal's entrance could potentially redefine the perception of stablecoins, making them more palatable to both consumers and regulators,” Finery Markets, CEO, Konstantin Shulga said.

"As for PYUSD's impact on stablecoin adoption: Given PayPal's immense global reach and the integration of PYUSD for peer-to-peer payments, including between digital wallets like PayPal and Venmo, we can anticipate an uptick in user familiarity and trust in stablecoins,” he added.

PYUSD's functionality, he adds, which makes it redeemable for dollars and convertible with other digital currencies (Bitcoin, Bitcoin Cash, Ethereum, and Litecoin are the only ones currently supported by PayPal) brings flexibility that might appeal to a broader audience.

PayPal’s latest move though also resurfaces an age-old debate in crypto land as to whether stablecoins can usher in mainstream adoption of digital assets. 

And, more to the point, whether, they are actually stable?

The Terra-Luna collapse left a deep chasm of concern about the safety of stablecoins, although it is key to understand the difference between the algorithmic nature of the latter and PayPal’s PYUSD.

More important still is the future of crypto regulation, most pertinently in the US where Congress is currently advancing a bill to regulate stablecoins. But the likes of Revolut have recently pulled up the drawbridge owing to the uncertainty and apparent hostility to crypto.

While Congress is not well known for its speed, particularly on crypto, PayPal's stablecoin launch may well speed things up.

The end of the Crypto Winter might not be fully insight but a thaw may just have begun.