PayPal Senior Vice President of Digital Currencies, Jose Fernandez da Ponte, emphasized the critical role of banks and regulation in unlocking the full potential of stablecoins. He spoke about this during his keynote address at the Consensus 2025 conference in Toronto. His remarks highlight the growing need for regulatory clarity and financial infrastructure to support the expansion of stablecoins beyond crypto-native circles.
The Importance of Banks in Scaling Stablecoins
Stablecoins, digital currencies pegged to traditional assets like the US dollar, have emerged as a bridge between the volatile world of cryptocurrencies and the stability of traditional finance. However, their growth has been constrained by regulatory grey areas and concerns about financial stability.
Fernandez da Ponte argued that incorporating banks into the stablecoin ecosystem is essential for achieving broader adoption.
“If stablecoins are to grow outside of crypto-native circles, banks in this market will be crucial because their infrastructure—from custody to providing fiat rails—will be vital. Both the fabric and the connectivity must function.”
Banks bring trusted infrastructure, compliance expertise, and access to fiat currency systems. These resources enable stablecoins to operate seamlessly within the global financial framework. Without this integration, Fernandez believes that stablecoins cannot reach their full potential.
PayPal’s PYUSD: Modest Adoption Despite Strong Foundations
PayPal’s own stablecoin, PYUSD, launched in August 2023, is fully backed by US dollar deposits and short-term US treasuries, ensuring a 1:1 redemption ratio. Despite its robust backing, PYUSD has seen modest adoption, with a market capitalization of approximately $872 million. This is far behind industry leaders like Tether and Circle, which collectively command nearly 90% of the $238 billion stablecoin market.
Fernandez stressed that market capitalization alone should not be the metric for success. Instead, he advocated focusing on factors like velocity (the frequency of transactions), active wallets, and the total number of transactions. These reflect real-world utility.
Clear Regulation as a Catalyst for Growth
The lack of clear regulation has been a significant barrier to stablecoin adoption. Fernandez highlighted that regulatory frameworks are needed to build trust and encourage broader participation from both consumers and financial institutions.
His comments come amid ongoing efforts to pass stablecoin legislation in the US, including the proposed GENIUS Act. This legislation aims to reshape the stablecoin market. The bill seeks to impose strict licensing, asset-backing, and transparency requirements on issuers, while also enhancing consumer protections and oversight.
“Once there are clear regulations, we expect consolidation after a wave of new issuers floods the industry,” Fernandez said.
He predicted that the market would see more than two stablecoins. However, he expected fewer than 300 due to stricter regulations weeding out less credible players.
Industry Leaders Weigh In
Other prominent voices in the financial sector echoed Fernandez’s sentiments. Anthony Soohoo, Chairman and CEO of MoneyGram, described the pending stablecoin legislation as a breakthrough moment for the industry.
“There’s always hesitation: Can I trust this? [The stablecoin legislation] will answer many of those questions.”
Soohoo noted that MoneyGram, with nearly one million cash-access locations across 200 countries, plays a crucial role in enabling access to stablecoins. This access is vital for international payments and as stores of value in nations with high inflation and volatile currencies.
The GENIUS Act: A Step Toward Regulatory Clarity
The GENIUS Act, led by Senator Bill Hagerty, is currently under consideration in the US Senate . The bipartisan proposal includes several key provisions:
- Stricter regulations for tech firms handling financial assets.
- Enhanced consumer protections and increased oversight of public figures, including Elon Musk.
- Tightened bankruptcy protections and prevention of misuse of FDIC insurance.
Under the bill, stablecoin issuers with more than $10 billion in assets would fall under the oversight of the Federal Reserve. In contrast, smaller issuers would be regulated by state authorities. All stablecoins must be fully backed by US dollars or Treasury securities.
The legislation aims to strengthen the US dollar’s status in the global marketplace. It also promotes broader financial inclusion in the digital era.
Opportunities for Developed and Emerging Markets
While developed countries have been slower to embrace stablecoins, Fernandez pointed out that clear regulation could unlock significant opportunities. For instance, stablecoins could streamline cross-border disbursements and corporate treasury activities. They offer faster, cheaper, and more efficient solutions compared to traditional systems.
In emerging markets, stablecoins already serve as critical tools for international payments. Also, they act as stores of value in regions with high inflation and unstable currencies.
Challenges and the Path Forward
Despite their promise, stablecoins face challenges, including regulatory scrutiny, competition from established players like Tether and Circle, and the need for widespread trust. Fernandez acknowledged that scaling stablecoins requires collaboration between regulators, banks, and technology providers.
As lawmakers prepare to vote on the GENIUS Act, the outcome will serve as a litmus test for whether the Senate is ready to embrace digital asset legislation. Such legislation must balance accountability with innovation.
