Bitcoin and Ethereum — though “wildly successful” — have not fulfilled the original expectations many had for crypto, according to an executive at Pantera Capital.

But stablecoins are poised to, Jeff Lewis, a product manager at the crypto-focused hedge, wrote in a Tuesday letter.

Fifteen years after the Bitcoin whitepaper, BTC’s lack of speed and scalability hurts its case for being a good replacement for money, he notes. Ethereum “has become the programmable decentralized system that Bitcoin alone could not be,” paving the way for an ecosystem of NFTs, Web3 applications and DeFi powered by ether [ETH].  

“Unfortunately, Ethereum is almost as volatile as bitcoin, making it unsuitable as a stable currency,” Lewis adds. 

Stablecoins, on the other hand, are set to enable peer-to-peer transfers of value. They will also help people to protect against unstable currencies and avoid trusting service providers, the Pantera executive said.

Lewis compares payments giant PayPal to a stablecoin, noting it allows users to cheaply transfer digital ledger entries worth one dollar to merchants and peers worldwide. The company even launched its own stablecoin, PYUSD, in August. 

The largest stablecoins — tether (USDT) and USDC — are not natively interest bearing. But a trustless, transparent and yield-bearing “PayPal 2.0” could be on the way, Lewis argues. 

This vision appears hypothetical, as PayPal has not announced any such plans. A PayPal spokesperson did not immediately return a request for comment on the matter. 

“That stablecoin is coming because as soon as regulations are clear, market conditions will force providers to offer money market yields to be competitive,” Lewis wrote in the letter. “We are already witnessing an explosion in the stablecoin market of coins with yields generated by underlying money-market investments as well as the tokenization of the money-market itself.”

Read more: Powell: Stablecoins are a ‘form of money’ the Fed needs to regulate

Franklin Templeton, a fund group with about $1.5 trillion in assets under management, in 2021 launched a money market fund that uses a public blockchain to record transactions. One share of the fund is represented by one BENJI token — allowing it to act like a stablecoin with yield.

JPMorgan has built blockchain-based applications, while Citi’s new Citi Token Services intends to let clients access tokenized deposits, cross-border payments and automated trade finance solutions 24 hours a day.

Ondo Finance launched tokenized US Treasury and bond offerings earlier this year before Adapt3r Digital later in August unveiled a tokenized fund on decentralized marketplace Archblock.

Read more: TradFi, DeFi convergence continues through tokenizing real-world assets

Stablecoins “present one of the clearest prospective templates for tokenization today,” Coinbase institutional research head David Duong and analyst David Han wrote in a Monday report.  

“We think stablecoin liquidity could be one of the clearest ways that tokenization intersects with the broader crypto economy as part of the next market cycle,” Duong and Han added. 
PayPal’s platform is more attractive than banks because of its ease of use and its quickness, Pantera’s Lewis noted. 

“Well, what if PayPal 2.0 has a market yield and is verifiably, visibly safe?” he added. “We get the first true mass-adoption of a token and we unleash the next great wave of growth in the entire crypto ecosystem, as consumers can focus on the value of the products and services within the crypto ecosystem instead of the tokens issued by those projects.”

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