Home | Crypto News | Fednow And Paypal’s USD Stablecoin’s Significance Is Evaluated By Bank Of America

Fednow And Paypal’s USD Stablecoin’s Significance Is Evaluated By Bank Of America

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Bank of America analyzed Paypal’s U.S. dollar stablecoin and Fednow. Paypal’s stablecoin won’t bring “accelerated regulatory clarity,” thus the bank doesn’t expect widespread adoption of PYUSD soon. However, Bank of America thinks stablecoins could improve payments.

Last week, Bank of America released its Global Digital Asset Strategy study on Paypal’s U.S. dollar stablecoin and Fednow. Alkesh Shah, global crypto and digital assets strategy at Bank of America Global Research, and Andrew Moss, global digital asset strategist, wrote the report.

Paypal USD (PYUSD), a dollar-denominated stablecoin, will be offered to U.S. Paypal clients. The stablecoin, backed by the U.S. dollar, short-term Treasuries, and cash equivalents, will be interoperable with select third-party digital asset wallets, according to the payments giant.

Bank of America noted that Paypal, with 435 million users, is the first worldwide corporation “to launch a stablecoin with regulatory approval.”

“We expect PYPL’s PYUSD launch to drive payments efficiencies and improve customer experience over time, but PYUSD adoption is unlikely to be significant in the near term, given lack of wallet compatibility, exchange trading pairs or new functionality.”

“Over the longer term, we expect PYUSD to experience additional adoption headwinds as competition from CBDCs [central bank digital currencies] and yield-bearing stablecoins increases,” Bank of America added. With short-term rates reaching 5%, yield-bearing stablecoins like USDT and USDC will likely become more available and desirable.

Concerning crypto laws, Bank of America stated:

“We do not expect PYUSD’s launch to lead to accelerated regulatory clarity, given the stablecoin’s issuance does not alter systemic risk for traditional markets, but if non-banks are ultimately barred from stablecoin issuance, the stablecoin may face regulatory headwinds.”

On July 20, the Fednow service went live to “enable financial institutions, specifically banks and credit unions, to facilitate bank account-to-bank account transfers of customer funds in (near) real-time,” according to the Bank of America report. Moss and Shah stated:

“We view Fednow as a needed and innovative solution to a problem—inefficient domestic payments and transfers—that other countries have already solved.”

“Instead, Fednow uses traditional payment rails to produce an interbank settlement system,” experts said.

They added: “As the digital asset ecosystem evolves, we see the potential for stablecoins and, ultimately, CBDCs to provide an even better solution that would be faster and cheaper, especially for cross-border payments and transfers, which Fednow does not support.” Without financial institution acceptance, network effects, and end-user interfaces and apps, Fednow’s efficiencies are unlikely to be fully realized.

Jay Solano

Jay Solano

Jay is a crypto and NFT enthusiast dedicated to exploring the dynamic world of digital assets. As a crypto blog writer, he is sharing his knowledge of the latest trends, breakthroughs, and investment opportunities in the blockchain world.

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