- Berstein’s research report notes that the stablecoin market has the potential to grow 22 times in just the next five years.
- PayPal’s launch of PYUSD stablecoin comes at the right time and will create enough room for the payments giant in this expanding stablecoin market.
In its latest research report published on Wednesday, August 9, Bernstein noted that the global stablecoin market is likely to grow to $2.8 billion just within the next five years from now. Just for context, the current size of the stablecoin market is $125 billion today. Thus, Berstein is predicting a 22x growth from the current levels.
According to the report, connecting with consumer platforms will set in motion a “growth flywheel” for stablecoins. Stablecoins are specific kinds of cryptocurrencies tied to another asset, like the U.S. dollar. This connection will enable them to attract users and expand their reach beyond platforms exclusively related to cryptocurrencies.
Bernstein analysts led by Gautam Chhugani wrote: “We expect major global financial and consumer platforms to issue co-branded stablecoins to power value-exchange on their platforms”.
The report explained that stablecoins will operate using a rapid financial settlement layer (known as layer 2 or centralized consumer platforms) on public blockchains like Ethereum. The growth of stablecoins will be primarily driven by those that are regulated and established onshore.
The report also noted that there is stronger political backing for stablecoin regulation compared to broader cryptocurrency regulation. Several jurisdictions, including Singapore, Hong Kong, and Japan, are initiating pilot projects involving stablecoins and central bank digital currencies (CBDCs).
PayPal Has the Perfect Timing for Stablecoin Launch
Earlier this week, American multinational payments firm PayPal launch its USD-pegged stablecoin PayPal USD (PYUSD) on the Ethereum blockchain network. Commenting on the PYUSD launch, PayPal Chief Executive Officer Dan Schulman said that “The vision over time is that this becomes a part of the overall payments infrastructure”.
Considering Nerstein’s projection of strong growth in the stablecoin market, PayPal’s timing of launch seems to be absolutely perfect. Paxos Trust Co. is the issuer of PYUSD stablecoin. Furthermore, it is supported entirely by deposits in US dollars, short-term Treasuries, and comparable forms of cash assets.
With Paxos already under the regulatory oversight of NYDFS, PayPal has ensured regulatory protection for PYUSD. Additionally, PayPal conducted extensive discussions with US regulators and policymakers before launching the PYUSD stablecoin.
Currently, the stablecoin market looks quite concentrated in the hands of a few players. Tether’s USDT stablecoin alone has more than 50% share in the global stablecoin market. With the stablecoin market expected to grow vertically, PayPal will have enough room to expand itself in the market.
Tether CTO Paolo Ardoino said that PayPal’s entry into the market doesn’t threaten Tether in any way. Instead, he added: “It’s interesting. Another stablecoin in the U.S. It could lead to the erosion of revenues for payments that have been mainly fueling Mastercard and Visa.
It will also help the industry to grow further and push for sensible regulations. “It might mean an additional decline of our competition that is very much focused on the U.S.,” he said, possibly hinting at rival Circle’s USDC stablecoin. “Tether instead focuses on emerging markets and developing countries.”
