Stablecoin adoption is poised to reach new heights as PayPal and MoneyGram executives discuss the crucial role of traditional banking systems in unlocking their full potential.
The use of stablecoins has gained significant traction in recent years, but their true potential remains to be fully realized. According to Jose Fernandez da Ponte, senior vice president of digital currencies at PayPal, banks are essential for the success of stablecoins, providing necessary infrastructure and connectivity.
A stablecoin is a type of cryptocurrency that is pegged to a fiat currency, such as the US dollar.
It aims to maintain a stable value relative to the underlying asset, reducing price volatility.
Stablecoins are often used for trading, remittances, and cross-border payments due to their stability and low fees.
The Role of Regulation in Unlocking Adoption
Fernandez da Ponte emphasized that regulation is crucial for unlocking adoption and increasing trust in stablecoins. ‘Banks need to be part of crypto for stablecoins to succeed,’ he said. ‘Their infrastructure—from custody to providing fiat rails—will be essential if stablecoins are to scale beyond crypto-native circles.’
Regulation refers to the rules and laws created by governments or organizations to govern behavior, activities, and industries.
It ensures compliance with standards, protects consumers, and promotes fair competition.
Effective regulation balances individual freedoms with collective needs, preventing harm and promoting public welfare.
Regulatory frameworks can be industry-specific, such as finance or healthcare, or general, like environmental protection.
Understanding the purpose and scope of regulations is essential for businesses, individuals, and governments to function effectively.
Meanwhile, Anthony Soohoo, chairman and CEO of MoneyGram, highlighted the importance of regulatory clarity in the U.S. Stablecoin legislation could redefine the market and allow banks to enter the space. ‘This is going to be a big unlock,’ he said. ‘There’s always hesitation: Can I trust this? [The stablecoin legislation] is going to answer a lot of those questions.’
Stablecoins are a type of cryptocurrency designed to maintain a stable value relative to a fiat currency.
However, the lack of clear regulations has raised concerns among regulators and investors alike.
In 2022, the US Securities and Exchange Commission (SEC) began scrutinizing stablecoin issuers, citing potential securities law violations.
The SEC's chairman, Gary Gensler, stated that stablecoins may be subject to federal securities laws, which could lead to stricter regulations.
Several countries, including Japan and Singapore, have also started exploring regulatory frameworks for stablecoins.
Real-World Use Cases Drive Adoption
Both executives noted that real-world use cases, not hype, will determine if stablecoins can reach the trillion-dollar scale projected for the next few years. Soohoo pointed out that consumers in emerging markets are seeking dollar-backed stablecoins as stores of value and tools for cross-border payments. MoneyGram is helping facilitate this access through its operations in over 200 countries with nearly half a million cash-access locations.
In developed countries, clear regulation will enable stablecoins to streamline corporate treasury operations and cross-border disbursement. ‘We used to have this mad rush on Friday to make sure money was in the right places before the weekend,’ Fernandez da Ponte said. ‘Now we’re sending money to the Philippines and Africa in ten minutes with stablecoins.’
A Wave of New Issuers and Consolidation
Fernandez da Ponte predicted that a wave of new issuers will enter the market once regulation is in place, followed by a period of consolidation. Currently, Tether‘s USDT and Circle‘s USDC dominate the market, representing nearly 90% of the $230 billion asset class. PayPal‘s PYUSD launched in 2023 lags far behind with $900 million supply.
‘We look at velocity, active wallets, number of transactions,’ Fernandez da Ponte said. ‘Those are what drive real usage.’ He pushed back on market cap as the primary metric for success, arguing that these metrics better reflect the true potential of stablecoins.
