The launch this week of PayPal's stablecoin could benefit Ethereum by increasing its total value locked, according to JPMorgan.
"This could boost Ethereum activity and enhance Ethereum's network utility as a stablecoin/DeFi platform," JPMorgan analyst Nikolaos Panigirtzoglou told The Block. "In other words, more firms would be encouraged in the future to choose the Ethereum blockchain (or its layer 2 platforms) for their stablecoin or decentralized projects."
Ethereum could further benefit from PYUSD because the stablecoin could fill the void left by the $20 billion shrinkage of Binance's BUSD stablecoin, which was forced to shut down by U.S. regulators earlier this year, Panigirtzoglou said. If PYUSD fills that void, "DeFi TVL would shift from Binance Smart Chain to the Ethereum blockchain (or its layer 2 platforms)," he added.
Some crypto-native experts, however, criticized PayPal for choosing Ethereum for its stablecoin, given the blockchain's high transaction fees.
"The gas fees of using PYUSD will be ridiculous, which will disincentivize its usage," Jayendra Jog, co-founder of Sei Network, a Layer 1 blockchain network under development that aims to offer lower transaction fees, told The Block. "To help make the user experience better, PayPal will either need to subsidize transaction costs or will need to help support PYUSD on other networks with cheaper gas fees," Jog said.
Panigirtzoglou and fellow JPMorgan analyst Mayur Yeole said that PayPal getting into the stablecoin business will boost synergies in payment networks across both traditional and decentralized finance.
"However, it is important to emphasize that the stablecoin issuers' regulatory framework is still pending in the U.S. and the lighter compliance/regulatory frameworks enjoyed by fintech companies might change in the future," they said.
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