PayPal said on Jan. 8 that it is “exploring a stablecoin” that could be called PayPal Coin after a developer found evidence of a stablecoin in the source code of the company’s iPhone app. The stablecoin could be called PayPal Coin.
This person is PayPal’s senior vice president of crypto and digital currencies.
He said at the time that the company would work closely with regulators to move forward with the stablecoin, which could help the fintech company avoid the same fate as Meta’s Diem project, which was killed by US senators.
The company has said that the source code for its iPhone app was written in a hackathon that took place inside the company.
When Cointelegraph called PayPal to find out more, a spokesperson agreed with the previous report but didn’t say anything else.
Trying to figure out the long-term effects of a PayPal stablecoin is difficult. Some experts think the move by the company is a good thing for the cryptocurrency industry, but others think it will be more of the same.
Could PayPal Coin normalize crypto payments?
It’s clear that a traditional finance company that wants to get into the cryptocurrency business and start making its own stablecoin is very different from a crypto-native company that wants to make its own stablecoin.
A lot of people who use traditional finance companies aren’t already familiar with cryptocurrency wallets or how volatile the market can be.
Users in the US and the UK can already buy, sell, and hold Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), and Litecoin. They can also make payments in these crypto assets.
PayPal doesn’t say how many of its users have paid with cryptocurrency, but it’s known that stablecoins are mostly used to trade and take advantage of opportunities in the world of decentralized finance.
As a result of PayPal’s continued involvement in the cryptocurrency world through the launch of a stablecoin, other traditional banking and payment companies may start to look into blockchain technology as well. Marwan Forzley, the CEO of online payments platform Veem, said this.
Forzley told Cointelegraph that stablecoins “most likely” will become part of the global payment system because small businesses need to move money in a safe environment with on- and off-ramps for different apps.
Forzley also said:
“PayPal Coin could fuel general interest in payments overall. Consumers and small businesses alike are looking for a safe and reliable alternative to traditional currencies and payment networks.”
Max Galka, CEO of blockchain search engine Elementus, seemed to agree with Forzley’s assessment. He said that when well-known platforms like PayPal support cryptocurrencies, stablecoins are put into a “trustworthy realm for a large swath of the population.”
Having a stablecoin from PayPal would “definitely” open up cryptocurrency to more people who “have not had the desire to really figure out this niche space.”
It was Galka who told us:
“Right now, there aren’t that many well-established, trusted organizations in this space where trust is such a critical component. PayPal would be one of the first major financial companies to embrace crypto.”
The move puts PayPal “squarely on the map as a cryptocurrency company,” which could help the company’s other cryptocurrency offerings. People’s trust in PayPal could help PayPal Coin “serve a lot of additional purposes from what traditional stablecoins can offer by using that trust as their payment rails.” This is what he said.
Arbel Arif, the CEO and founder of crypto marketplace Shopping.io, told Cointelegraph that he thinks PayPal’s move into the crypto world is a good thing. He said that having “big players” help with e-commerce crypto transactions “moves us closer to the new era of commercial trading.”
Tim Frost, the founder and CEO of the Yield App wealth management platform, said that cryptocurrency payments are “making their way into the mainstream.” This is because “a number of companies now allow digital asset owners to pay with digital currencies using Visa or MasterCard.”
As Frost sees it, it’s not clear whether or not PayPal launching its own stablecoin would start a shift to a more cryptocurrency-based world of payments. However, he thinks it could.
Some people didn’t think PayPal Coin could be a big change, though.
Cryptocurrency payment gateway CoinGate’s Rytis Bieliauskas said he doesn’t see how PayPal stablecoins are “fundamentally different” from what the company already does, if they’re “centrally controlled” and have their value guaranteed by the company, like PayPal already does.
Bieliauskas said that it’s “interesting” to see that PayPal wants to use crypto in a positive PR move. This means that the public now sees cryptocurrencies as something positive, not negative.
Overcoming regulatory challenges
PayPal made it clear that if and when it moves forward with its stablecoin project, it will work with the relevant regulators. However, because of the size of its business, it will still have to deal with a lot of regulatory issues.
That’s what Eli Taranto, EQIBank’s chief business development officer, says. EQIBank is a licensed digital bank that works with corporations and wealthy people.
Taranto said that because PayPal is spread out across the world, it will have to deal with “worldwide regulatory issues” when it comes to crypto. This will be “quite interesting and a necessary challenge,” he said.
It means that PayPal will have to connect as many tokens and chains as possible, building faster, better, fully automated cross-chain instruments as it goes. This is because PayPal makes money from transactions.
He also said:
“This may eventually serve as a catalyst for mass adaptation of crypto and give the crypto processing industry a boost, as venture capital will begin to flow to this relatively new sector.”
Taranto said that if PayPal can get regulators to like them, it will have an effect on other businesses. They will see it as a sign that a path to global regulatory compliance has been set up.
Stablecoin issuers aren’t just under scrutiny from regulators. They also have to be as transparent as possible about the backers of their stablecoins.
Starting a stablecoin will get PayPal more attention, so it’s important to ask: What will they get out of it?
How PayPal benefits from a stablecoin
PayPal’s own stablecoin is good for the company’s bottom line in the end.
The editor-in-chief of financial information site Investopedia said that in the third quarter of 2021, transaction-related expenses cost the company $2.7 billion.
PayPal could save a lot of money if it used a high-speed blockchain like Solana.
The company doesn’t let people buy or sell Solana (SOL) on its platform right now. It’s not clear which blockchain the stablecoin will be used on.
Jerald David, the head of digital asset investment firm Arca, said that PayPal is “uniquely positioned to adopt cryptocurrencies because they already have a lot of customers and because this new product would be a good addition to their existing business.”
“By marrying the efficiencies of blockchain technology with their existing business model, they can help instill and solidify the confidence of individuals and small businesses in the digital asset industry.”
There is a good chance that when people start using digital assets in the future, they will do so through a third party that has earned their trust, like PayPal.
How much we know about PayPal’s plans for stablecoins is not very much.
Steve Moser, the developer who found PayPal Coin’s code on the company’s iPhone app, later said that PayPal had references to stablecoins linked to the pound and euro in the app. This suggests that PayPal would launch stablecoins linked to different fiat currencies in the future.
What if PayPal Coin is something separate from Paypal’s USD stable coin? What if PayPal was also working on stable coins for the Pound and the Euro? #PayPalCoin $PYPL $PYPLUSD https://t.co/vyBmMCmp7f pic.twitter.com/qRJ0IrbBBJ
— Steve Moser (@SteveMoser) January 10, 2022
PayPal, on the other hand, took down images of its stablecoins linked to the euro and the pound soon after PayPal Coin started making headlines.
In the code, the word “Neo” was still there, which suggests that the company is also paying attention to it, as well.
PayPal Coin’s real impact will depend on how the company plans to use the stablecoin, so that’s what you need to know.
While it has the chance to make crypto more common in traditional payment systems, it also has the chance to be “just another” stablecoin.
Cryptocurrency fans may have dreamed of this best-case scenario for years, even before Bitcoin was worth more than $1,000. This shows how far we’ve come in just a few years.