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Stablecoin market recovers: growth of US$5.48 billion in 22 days

In recent weeks, the market value of major stablecoins has seen a notable increase. The economy of these fiat-pegged tokens expanded from $123.66 billion to the current $129.14 billion. This substantial growth of nearly $6 billion comes after the stablecoin industry lost tens of billions last year. In particular, tokens like BUSD, USDP, and USDC have seen considerable redemptions over the past 12 months.

Stablecoins see multi-billion dollar market expansion in three weeks

Recent data indicates that from November 2 to 24, 2023, over 22 days, the stablecoin market expanded by $5.48 billion. In the last 24 hours, fiat-pegged cryptocurrencies reached a trading volume of $50.74 billion, in contrast to the total global trading volume of $88.65 billion.

Metrics show that stablecoin swaps account for 57.23% of total trading volume worldwide. Tether (USDT) leads the way with a market cap of $88.59 billion, accounting for 68.59% of the total market capitalization of $129.14 billion and accounting for 5.93% of the entire US$ crypto economy 1.4 trillion.

Over the past 22 days, USDT market capitalization has increased by 4.24%. The USD coin (USDC) has also seen modest growth since November 2, with its market capitalization increasing 0.81% from $24.5 billion to the current $24.7 billion.

The market cap of DAI has increased by 43.2%, while the supply of trueusd (TUSD) has decreased by 5.38% since November 2nd. BUSD has been declining all year following Paxos’ decision to stop minting BUSD.

Twenty-two days ago, BUSD’s market capitalization was $1.95 billion, which has now dropped to $1.74 billion, a drop of 10.76%. The newly arrived first digital dollar (FDUSD) saw its market value increase from $590 million to $733 million, an increase of 24.23%.

Tron’s USDD fell slightly from $725 million, down 0.82% to the current $719 million. The Frax Dollar (FRAX) also had a slight drop of 0.44%, going from US$671 million to US$668 million in the same period.

Paxos, which supports Paypal’s PYUSD issuance, saw a 1.10% reduction in the supply of pax dollars (USDP), from $453 million to $448 million. The tenth largest stablecoin by market cap, Liquidity USD (LUSD), saw its supply drop from $220 million to $205 million. The market capitalizations of alchemix usd (ALUSD) and paypal usd (PYUSD) remained relatively unchanged.

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Bank of America predicts that PYUSD will not be easily adopted

Bank of America reacts to the launch of PayPal’s PYUSD stablecoin, pegged to the US dollar, arguing that the asset is unlikely to be widely used, at least not anytime soon.

PayPal’s recent groundbreaking announcement about the launch of its US dollar-denominated stablecoin PYUSD has sparked much criticism around the world. While it seems like a significant step toward cryptocurrency adoption, some say PayPal won’t be very successful any time soon.

One of the largest banks in the US, Bank of America, outlined the main reasons why PayPal USD is unlikely to see immediate adoption in its recent research report.

Competing against CDBCs

First, Bank of America analysts Alkesh Shah and Andrew Moss explained that PayPal’s stablecoin could face intense competition in the market:

“Longer term, we expect PYUSD to experience additional hurdles to adoption as competition from central bank digital currencies (CBDCs) and yield stablecoins increases.”

It is true that several countries are actively exploring Central Bank Digital Currencies (CBDCs) that could compete with stablecoins, as both are based on similar technologies and are pegged to fiat currencies. Only this year, countries like Brazil, South Korea, Russia, Japan, the United Kingdom, among others, have reported news about the launch of their CBDCs. There is speculation that the US may also be working on its CBDC, although some of the country’s presidential candidates have claimed to be against it.

Competing against other stablecoins

Also, there are many other stablecoins that PYUSD will have to compete with. Profitable stablecoins are now especially attractive to investors, according to Bank of America:

“Investors may have been fine holding non-yielding stablecoins like USDT and USDC when rates were close to zero, but it is likely that yielding stablecoins will become increasingly available and attractive with short-term rates above 5%.” .

Dealing with regulatory scrutiny

Finally, the analysts also suggested that PayPal could face regulatory problems if traditional banks are prohibited from issuing stablecoins:

“Investors are likely to be indifferent to the stablecoins they own, as long as the stablecoins are perceived as safe and accessible on major trading platforms. We do not expect the launch of PYUSD to lead to accelerated regulatory clarity, as stablecoin issuance does not change the systemic risk for traditional markets, but stablecoins could face regulatory hurdles if nonbanks are prevented from issuing stablecoins. ”.

Just one day after PayPal unveiled its stablecoin project, the US Federal Reserve released new guidelines on the use of “dollar tokens” by US banks. According to the notice, to engage in any type of stablecoin-related activity, US banks will now need to receive a written supervisory no objection from the Federal Reserve.

Meanwhile, cryptocurrency scammers didn’t wait long to try to cash in on the big news and flooded decentralized exchanges with fake PayPal tokens.

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PayPal’s USD debut: why its new stablecoin is causing concern

PayPal has completed a long period of careful consideration, ups and downs to introduce its new USD-pegged stablecoin.

The stablecoin, called PayPal USD (PYUSD), makes it easy for users to engage in activities like “buying, selling, holding, and transferring” the token through the payment processor interface.

While these features may seem a bit mundane, resembling the features of a conventional checking account or a real PayPal account containing US dollars, they mark an important milestone after the company’s extensive two-year journey.

PayPal Stablecoin raises alarms about centralization functions

Sarah Hodder, an expert in digital asset law, drew X’s attention to the strong similarities between PayPal’s stablecoin and a central bank digital currency that could facilitate censorship.

PYUSD was officially introduced on August 7 and is issued by Paxos Trust Co., renowned for its holding in Binance USD (BUSD).

Using the Ethereum platform, PYUSD is designed for digital transactions and Web3 applications, and the company reveals plans for its availability to US clients in the near future.

Phelps suggested that this move could serve as a clever ploy by PayPal to minimize its own significant fees, juxtaposing them with the substantial gas costs associated with Ethereum.

In a notable gesture, PayPal itself seemed to recognize the potential for high fees beyond its own platform, suggesting an awareness of the challenges posed by Ethereum’s transaction costs.