The European Central Bank (ECB) has expressed concern on PayPal’s new stablecoin, suggesting it could potentially dominate the payment space. The bank therefore calls for an urgent digital Euro launch to retain control of the financial system.
Speaking during the Committee on Economic and Monetary Affairs of the European Parliament in Brussels, ECB executive Fabio Panetta expressed concern that there is no regulatory framework around decentralized stablecoins.
Specifically, Panetta expressed worry that PayPal could greatly expand the reach of its stablecoin, just like other big tech companies entering the crypto space.
While acknowledging that the big tech companies may encourage innovation, he also stressed that they could hinder the growth of the industry if they happen to “attain a monopolistic position similar to how they have in other digital sectors”.
“The digital euro will give us a digital means of payment that, like cash, unites us because it can be used by everyone, everywhere. It will strengthen our autonomy and resilience by relying on European infrastructure and reduce our dependence on a handful of non-European providers,” he said.
Panetta believes that PayPal’s launch outfits stablecoin PYUSD should serve as motivation for the ECB to fasttrack the creation of a digital Euro. he also believes that a digital Euro will position the region for the digital economy.
About PayPal’s Stablecoin
PayPal launched its stablecoin, PYUSD last month as a big way to enter the crypto space. The stablecoin is pegged to the USD, just like many others that are already in circulation. However, the ECB seems particularly interested in PayPal’s stablecoin because it was launched by a big tech company.
The stablecoin however is facing significant challenges in the area of adoption, since existing stablecoins have taken a major share of the market already, most of which are also pegged to the USD.
An example is USDC which is issued by American financial technology company Circle, and is the most popular after USDT. PYUSD has to compete with these stablecoins in order to find its own place, many of which have said it’s not a competition.
In the meantime, experts say that PYUSD would need to be listed on top crypto exchanges to become widely adopted.
Stablecoin Regulation
Since the recent spike in the popularity of stablecoins, lawmakers in the U.S. have expressed great concern over their proliferation without any legal framework. The concern even intensified following the collapse of TerrUSD, an algorithmic stablecoin that decoupled from the USD, leading to massive losses for investors.
Lawmakers have therefore decided to pursue a legal framework for regulating stablecoins, stressing the conditions and entities that can issue stablecoins going forward.
