PayPal is finally preparing to enter the crypto world, as it explores the launch of its stablecoin. Stablecoins, as the name suggests, are intended to be stable in price. This is possible because they are pegged to an external fiat currency.
In other words, unlike most of the cryptocurrencies, which are volatile in price, stablecoins are a more consistent option. For that reason, PayPal is planning to launch its own stablecoin.
What are the assets that PayPal planning to induce as collateral?
According to the company, the assets backing the stablecoin can be
– a fiat currency, like USD or EUR
– of course, a cryptocurrency, like Ethereum
– even precious metals or real estate
Adam Nasli, head analyst at international broker comparison site BrokerChooser said “PayPal announced in early January that it is exploring the launch of its own stablecoin. In recent years, PayPal introduced more services around digital currencies, such as buying and selling cryptos. We’ve also seen examples of exploring stablecoin by tech companies. For example, Facebook (Meta)’s sponsored stablecoin, called Libra/Diem, didn’t succeed and Facebook will sell all assets related to Libra/Diem to Silvergate Capital Corporation”.
Will PayPal’s stablecoin affect normal payments?
Yes! the launch of its own stablecoin will undoubtedly have an impact on PayPal’s payment processes in the following ways:
- The greatest advantages are unquestionably lower transaction costs and widespread accessibility.
- It would incentivize banks to put more effort into digital currency development by creating fierce competition between tech companies and banks.
- Private-sector stablecoins raise a slew of regulatory concerns. Stablecoins, for example, should have proper risk management in place to ensure there is enough reserve.