Aug 11, 2023

The launch of PayPal’s (PYPL) stablecoin PayPal USD (PYUSD) will drive payments efficiencies and an improved customer experience, but adoption of the cryptocurrency is unlikely to be significant in the near term, Bank of America said in a research report on Thursday.

Video transcript

It's bank report time. The Bank of America says that paypal's stable coin is not likely to be used widely anytime soon. In a research report published yesterday, they said the stable coin will drive payment efficiencies and an improved customer experience, but adoption is unlikely to be significant in the near term. However, over the longer term, they expect additional adoption. Will you are our resident bank report, aficionado commenter? Tell me, what do you take from these insights? Water is what I don't know like that's how these things are, right? It's not gonna get adoption for a little bit. I think that's fair. I mean, there's CBD CS coming, there's like yield bearing accounts for a lot of these stable coins. I think coin base is pushing for something with like 4.6% interest on top of your stable coin holdings. I don't know if that product is live yet, but I saw like a marketing piece going around and like, why not? Right? Because a lot of these uh UFC coins or stable coins of some sort, they're backed by treasuries which are themselves earning yield around 4.5%. So, you know, you can do it. And the competition is also out there in terms of like traditional finance, right? Like apple right now, if you have money or your Apple account, you can go get yield immediately. So if you have an Apple credit card or an Apple bank account, like boom, right there, you have, you have that yield. And so this paypal table coin like it's awesome. I'm a huge proponent of it and I think it's like exactly what we want to start to see how like there's things that could be better with it. A lot of people point out some code issues. A lot of people point out paypal like policies and stances in the past and like freezing accounts, but like they're using their service, they're pretty upfront that they're gonna do that. So as long as there's like options on the table and people are building on top of the tool set that's already out there, that's already permission list, then I'm a huge fan of it. So I think that this report itself, they have to push these out there. I, I really just think like they, they create these and send them out to other banks or other banking partners who aren't really that invested in the space or paying attention that much to the space. Maybe you saw a headline and I guess here's some more like follow up context for those who are not really paying attention. I think this is gonna be a huge project. It's just gonna take a few years. Zach. Yeah, definitely a captain. Obvious headline here, like in the short term. No, it's not like what every crypto trader is gonna use in the long term. This is a huge signal. I think people discount how huge of a signal this is, this is a giant fintech firm saying that transmitting value dollars is better on blockchains. That's what they're saying. We can do all sorts of cool things with stable coins, with tokenized dollars than we could with the existing payment rails. That's a huge signal. So I'm also similarly interested about what's gonna come from this. We saw Jose who's the crypto lead uh at paypal, make some interesting comments today actually about novel applications for for stable coins like including uh in game assets, including streaming of payments, including all sorts of cool stuff A I agents within gaming stuff. So they're not thinking about this unsophisticated, right? They're thinking about this with some nuance and with some real long term vision that I think, you know, headlines such as these really gloss over. So again, I think paypal is probably saying, you know, this potentially expands the pie of the total paypal uh of the total stable coin usage in the world, right? I think if you look, there's something like 100 and $20 billion worth of stable coins issued currently, that's a very small drop in the bucket for what this could ultimately represent, which is the ability to transmit money across the border across the globe, easily, quickly, instant settlement, all sorts of good stuff that Blockchain believers have espoused for a long time. So, yeah, will it happen overnight? No way. But again, in the long term, I think this is an important signal for uh at least some mainstream buy-in to what stable coins can do when it comes to internet commerce. I saw some headlines about this paypal news that said paypal is entering the crowded stable coin market and I was like, ah are the stable coin market crowded? I don't think so. And if there's anyone who could enter a crowded market and succeed, I think it would be paypal. Paypal has 430 million users. Um And Zach, I completely agree with you. Some of the things that they're coming on saying that they're going to be using the stable coin for at least experimenting um how they can use the staple coin in, in different novel use cases is really interesting and I think really bang on it shows that they are thinking critically and smartly about how to uh move forward with this new product right now. I just want to remind everyone that uh with the, the paypal us D, I can never say py us D uh customers can transfer. I know it's hard. I don't want to call it Pie Us D. So Py us D I could, I'm just gonna transfer to stable pals because that's fun. And that was not an idea of mine. It was one that our producer came up with. I think it's great. But let me get back to the real news here. Py US D customers can transfer to external wallets, make peer to peer payments, pay for purchases and use it to convert to any supported crypto right now. To me that sounds like exchange light for their 430 million users. If we talk about mainstream adoption, I think making this available to that many people through a trusted brand. I've said that on the show before is just what we need. So it's just like a no brainer for me. I want to point to a quote from AC NBC article that I read this morning. This is from Omid Malian Adjunct professor at Columbia. He kind of took the more tame approach here suggested paypal is just future proofing themselves. He said paypal primarily earns revenue by charging merchants a fee for facilitating customers payments. However, if those customers, the merchants began transacting with crypto and the E theory, Blockchain, paypal wouldn't be able to charge those fees. One way to look at all of this is that paypal believes in the future of public Blockchain. So exactly what you were saying, Zach, I am just all in all happy and bullish about this news and I wish the bank report encapsulated more of that information, at least in the headline.

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