Lightspeed Newsletter: PayPal’s Solana integration doesn’t mean institutions are here

Howdy!

I hope your week has gone better than it has for the Minnesota Timberwolves. At least now they’ll be spared the trouble of losing in five games to the Celtics in the NBA Finals.

In this Friday edition, we’ll be zooming out from the week’s PayPal news to consider where Solana stands in the eyes of institutions — and their sweet, sweet liquidity. 

Is this Solana’s institutional adoption moment?

PayPal launched its stablecoin on Solana this week while pledging to explore payment use cases on the network. 

The news followed similar Solana interest shown in recent months by Stripe, Visa, and Shopify. That’s four integrations with payment giants in short succession — and to some, a vindication that the bear market months spent chewing glass are paying dividends. 

But then again, crypto payments initiatives are still pretty marginal in the US, and there’s certainly a range of seriousness when it comes to how large corporations treat their crypto desks. 

So, I reached out to more than a dozen builders and investors in the Solana ecosystem to ask whether PayPal Week represents a watershed in Solana’s use by institutions — or if the ecosystem is still in earlier stages of adoption. 

(I should note, all of these sources work in crypto and share a general belief that institutional adoption will become a reality at some point.)

According to my rough-hewn categories, 35% of these sources said Solana’s institutional moment has arrived, and 65% said Solana has some hill yet to climb. 

The general sentiment from the institution bulls was that Solana’s cheap fees and low transactions, coupled with the compliance features it now offers through token extensions, make Solana the go-to for any firm exploring crypto payment rails. 

“What was once a nice-to-have integration for many is now essential to stay competitive in the crypto payments landscape,” Chris Hermida, CEO of Switchboard, told me. 

Estimates put global payments revenue in the trillions, so even if institutional interest only extends as far as payment rails, that’s still a pretty large pie.

But if institutional adoption looks like becoming the mainstream blockchain, the question looks a little different.

“I think an institutional adoption moment is really when an application comes to dwarf the size of any other chain with its traffic and users so no I don’t think this represents such a moment,” Miko Matsumura, managing partner at gumi Cryptos Capital, said in a text. Matsumura added that every chain is one “killer application” away from being bigger than Ethereum.

Multiple other sources mentioned possible Solana spot ETFs as the next step for bringing in institutional liquidity. As I’ve written before, that’s probably a question for the not-so-near term.

Brandon Tucker, the head of communications at Solana staking protocol Marinade, wished for “regulatory clarity” surrounding staking as Solana looks to score interest from TradFi. 

Perhaps above all, to give the painfully boring answer, time will tell. 

“Institutional adoption isn’t a ‘wow, we’ve arrived’ moment but more of a gradual spectrum,” Blane Sims, the head of product at Truebit, said.

— Jack Kubinec

Zero In

56

That’s the number of holders — thus far — of PayPal’s PYUSD on Solana, per SolScan data. 

All told, the stablecoin boasts a market capitalization of just under $45 million days after the stablecoin’s port to Solana was first unveiled.

But before you start toasting USDC and PayPal’s other competitors on the network, consider a few things.

First, PayPal’s Solana stablecoin is just sort of…there. There’s no real incentive right now to boost participation. It’s entirely potential. 

Second, PYUSD was never going to crash the Solana stablecoin party right at the start. Remember: PayPal isn’t trying to create a trading-centric stablecoin like USDC or Tether. 

Rather, they’re in it for the payments — and the long haul at that. So, I’d be surprised if you see any significant growth before PayPal launches an accompanying product push. 

Stay tuned, as they say. 

— Michael McSweeney

The Pulse

ICYMI: Headlines you may have missed between the free drinks at Consensus side events

• Solana validators passed a proposal intended to disincentivize side deals on the network
• The crypto bridging protocol LayerZero expanded to Solana
• Switchboard, an oracle network which works with some liquid staking tokens on Solana, raised a $7.5 million Series A
• 21Shares’ parent company 21.co launched a wrapped bitcoin token on Solana
• The DAO for GMX, an Arbitrum- and Avalanche-based derivatives exchange, is weighing support for a GMX project on Solana
• Pump dot Fun added native live streaming
• JPMorgan casts doubt on SEC approval for Solana and other crypto ETFs: The Block

— Jack Kubinec

One Good DM

A message from Joe McCann, CEO at Asymmetric:

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