JPMorgan analysts have shed light on how the recent launch of PayPal’s stablecoin could potentially benefit Ethereum and other decentralized finance (DeFi) platforms.
1. Increased Total Value Locked
According to JPMorgan analyst Nikolaos Panigirtzoglou, the launch of PayPal’s stablecoin could boost Ethereum’s network utility and overall value, as more firms may opt for Ethereum-based blockchain platforms for their stablecoin and DeFi projects.
2. Benefit from $20 Billion Shrinkage:
The shrinkage of Binance’s BUSD stablecoin worth $20 billion, which was forced to shut down earlier this year by U.S. regulators, left a void that PYUSD could fill. If this happens, the DeFi TVL would shift from Binance Smart Chain to Ethereum blockchain or its layer 2 platforms, thereby further benefiting Ethereum.
3. Criticism of High Transaction Fees:
The use of PYUSD could be disincentivized by Ethereum’s high transaction fees, according to critics such as Jayendra Jog, co-founder of Sei Network, who suggests that PayPal may need to subsidize transaction costs or support PYUSD on other networks with cheaper gas fees to improve user experience.
4. Potential Boost in Synergies:
JPMorgan analysts highlighted how PayPal’s entry into the stablecoin market could establish synergies between payment networks across traditional and decentralized finance frameworks. However, the regulatory framework for stablecoin issuers is still pending in the U.S., and fintech companies might face more stringent compliance requirements in the future.