Tether cofounder assesses PayPal’s stablecoin prospects

stablecoin PYUSD from PayPal is unlikely to bring much innovation, but could potentially provide the company with additional profit. In an interview with CoinDesk, Tether co-founder William Quigley said.

“I don’t think PayPal will bring much innovation. I suspect they are looking at this mainly from the cost-saving angle, a portion of which they may share with end users or not,” the entrepreneur said.

Quigley left Tether in 2015. He was also an early investor in PayPal, but no longer owns shares in the company.

According to him, the payments giant spent 7-8 years looking at stablecoins to save costs on multi-currency transactions by eliminating intermediaries.

The launch of a “stablecoin” would involve the company buying a basket of currencies held in banks around the world. After tokenizing these deposits PayPal would obtain a multi-currency money supply free of third-party fees for cross-border transactions, he explained.

Thus the company would have the opportunity to avoid real currency exchanges involving intermediaries — there is only a token swap, he added.

“All transactions are now conducted on its private blockchain, off the Visa network and the banking system. There are no intermediaries left — only PayPal,” the entrepreneur stressed.

He noted that the company charges consumers and merchants about 2% for cross-border payments. In his view, using the stablecoin opens two possible paths for the firm.

“PayPal could continue charging currency conversion fees on each transaction, even if it no longer bears these costs, and keep 100% as additional profit. Or it could remove the charges and reduce customers’ cross-border transaction costs,” Quigley says.

On 7 August, PayPal announced the launch of the US-dollar-pegged PYUSD built on Ethereum.

The stablecoin has drawn a mixed reaction from participants in the crypto community. Some said PYUSD would spur broad adoption of digital assets, while others pointed to centralisation risks.

Bank of America experts conceded that the launch of a stablecoin could improve payment efficiency and customer service quality, but adoption of the asset is unlikely to be widespread.

In September, the PYUSD issuer Paxos confirmed 100% backing of the coins in circulation.