PayPal’s (PYPL) launch of its own dollar-pegged stablecoin, PayPal USD (PYUSD), is expected to drive payments efficiencies and an improved customer experience, according to Bank of America (BAC) in a research report on Thursday. “Investors may have been fine holding non-yield bearing stablecoins such as Tether (USDT) and USD Coin (USDC), when rates were close to zero, but yield-bearing stablecoins will likely become increasingly available and attractive with short-term rates above 5%,” the analysts wrote.
The payments giant said that its Ethereum-based token will be available first on PayPal and then on Venmo, and can be exchanged for dollars at any time. Bank of America believes investors are likely indifferent to which stablecoins they hold as long as they are perceived as “safe and accessible on the largest trading platforms.”
The report also noted that PYUSD’s launch is unlikely to lead to “accelerated regulatory clarity” as the stablecoin’s issuance “does not alter systemic risk for traditional markets.” However, it could face regulatory hurdles if non-banks are ultimately banned from stablecoin issuance. PYUSD is expected to target a different market that has remained largely untapped until now, “blockchain technology-enabled asset transfers, payments, and remittances,” the report added.