PayPal’s New Stablecoin Launch Sets Trend as Industry Titans Eye Digital Dollar Dominance

Major Players in E-commerce and Traditional Finance Explore Stablecoin Adoption Amid Regulatory Landscape Shifts

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The stablecoin launched by PayPal on Monday has the potential to become a trendsetter in the market.

A range of e-commerce companies and banks, including major traditional financial institutions, have shown interest in using or issuing digital dollars with Paxos, the issuer of PayPal’s PYUSD stablecoin, according to a source familiar with the negotiations.

Although no names have been disclosed, Walter Hessert, Head of Strategy at Paxos, stated in an interview with CoinDesk on Tuesday that the company “has been talking to many of the largest technology and financial services companies about stablecoins: integrating stablecoins or circulating white-label stablecoins in certain cases.” He added, “We believe many will follow PayPal.”

Lisa Ellis, an analyst at MoffettNathanson, notes: “I suspect once the legislation and appropriate safety valves are established, we will see big banks holding stablecoins, just as they hold all other forms of financial instruments to provide liquidity across different markets where they operate.”

Stablecoins are digital assets backed by reserves and typically linked to a traditional currency, often the US dollar. While there are many players in the market, two cryptocurrencies dominate: tether (USDT) and USD coin (USDC).

PayPal’s move marks the revival of Paxos’ white-label service, as New York State regulatory authorities ordered the company to stop issuing the No. 3 stablecoin, Binance, citing “various unresolved issues relating to Paxos’ supervision of its relationship with Binance.”

Binance is the world’s largest cryptocurrency exchange and is also in conflict with the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

Earlier in the summer, JPMorgan, Goldman Sachs, and BNY Mellon declined to answer Forbes’ questions about creating a stablecoin or even a banking version known as a deposit token.

The world may not have an absolute need for more tokens linked to the dollar, but with conservative management, the “stablecoin business” can be profitable.

Despite shadowy financial information, Tether, the issuer of USDT, announced profits exceeding $1 billion in each of the first two quarters of 2023, thanks to yields earned from its $83 billion worth of tokens.

Circle, issuer of USDC and Tether’s largest competitor with a value of $26 billion, has not published financial data since its failed attempt to go public last year, but based on the assets it manages, it could generate up to $2 billion in revenue this year.

PayPal’s stock hit a 6-year low in May and has declined by 12.9% since the beginning of the year. The company aims to increase liquidity.

“Over time, the world will come back to us to make its payments. We are interested in driving those flows to us, which we will also tokenize in various ways – beyond strict tokenization of reserves,” said Jose Fernandez da Ponte, Vice President and General Manager of Blockchain, Cryptocurrencies, and Digital Currencies at PayPal, in an interview with Bloomberg.

Neither PayPal nor Paxos responded to Forbes’ questions about the financial terms of their agreement.

PayPal’s stablecoin launch comes as Congress considers legislation to establish a federal regulatory framework for stablecoins.

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