PayPal launches stablecoin, but experts doubt it will make a difference in Africa

Experts have told Mariblock that the move makes little difference to the African payments ecosystem.

PayPal launches stablecoin, but experts doubt it will make a difference in Africa
Image: PayPal from Wikipedia. 

In a major move in the United States financial ecosystem, payments giant PayPal has launched its stablecoin, dubbed PayPal USD (PYUSD). According to the company’s announcement, PYUSD is backed entirely by deposits in the U.S. dollar, short-term treasuries and cash equivalents.

Quick facts

  • PayPal said it will gradually roll out the stablecoin, issued by Paxos Trust Co., in the coming weeks for users to transact. It will be initially available to PayPal’s U.S. users.
  • PYUSD is currently the only stablecoin supported within PayPal’s payment network.

Be smart: Stablecoin is a cryptocurrency whose value is pegged to another relatively stable asset, such as fiat or gold. In PYUSD’s case, its value is pegged 1:1 to the USD.

The African tilt

  • PayPal currently supports funds receipt for only a handful of African countries. Most countries on the continent can only send funds via the platform.
  • According to reports, African PayPal users who could not send or receive money through the platform in their own countries had to rely on the accounts of friends and relatives in supported countries.
  • Stablecoins have recently become a popular option for sending and receiving remittances in Africa.
  • Visa’s head of crypto initiatives, Cuy Sheffield, said in an interview that stablecoins have been a way for Africans to access dollars.
  • Sheffield said:
“I think one of the most interesting things that we’ve seen is the demand for stablecoins and the type of activity of developers building products around them … I think in many ways, we’ve seen stablecoins become a way to supply this very large global demand for dollars.”

The expert’s angle

  • PayPal did not respond to a request for comment on its expansion plans for PYUSD.
  • However, there have been opinions on what PYUSD’s launch could mean for PayPal’s African users.
  • Experts told Mariblock that the development makes little difference to the African payments ecosystem.
  • Chris Maurice, CEO of the pan-African exchange Yellow Card, said in a chat with Mariblock that Africans already have access to the two largest stablecoins by market value, Tether USD (USDT) and USD Coin (USDC).
  • He also raised questions about the availability of PYUSD on other exchanges and not just on PayPal’s platform.
  • Maurice said:
“I am not sure it [PayPal’s launch of PYUSD] means anything yet. Africa already has USDT and USDC. So, the question is, how will PayPal get people outside of the PayPal ecosystem [to use] their stablecoin? That is the billion-dollar question that we need to hear from them.”
  • Michael Kimani, president of the Blockchain Association of Kenya, shared a similar opinion. He said PayPal already has arrangements with some local institutions to help Africans withdraw their cash through the platform, and PYUSD may not make much difference.
“PayPal is a common payment method for African freelancers. Also, PayPal works with local traditional institutions to help African users cash in and out of international payment transactions. In Kenya, Mpesa [and] Equity Bank have partnered with PayPal. If it [PYUSD] has the same KYC burdens as the old PayPal, then it hardly moves the needle,” he said.
  • Monica Singer, ConsenSys’ South African lead, believes that PayPal’s launch of a stablecoin shows more banks and payment service providers are looking to embrace blockchain technology as a solution to payment problems.
“Many more banks and other payments service providers will issue stablecoins. That is why central banks will issue central bank digital currencies as they are worried of losing the ability to set monetary policy if users leave fiat currencies for stablecoins and cryptocurrencies. If PayPal does not embrace the new technology, they will risk being disrupted by it,” she said.