PayPal’s PYUSD Stablecoin: Slow Start, Potential for Growth
The launch of PayPal’s new stablecoin, PayPal USD (PYUSD), has received a tepid response from investors as existing popular stablecoins like Tether (USDT) and USD Coin (USDC) continue to dominate the market. PYUSD, issued by Paxos Trust Company, is fully backed by U.S. dollar deposits, short-term U.S. Treasuries, and similar cash equivalents.
According to analytics firm Nansen, the majority of PYUSD is held in wallets controlled by Paxos, with only a small portion being held by everyday investors. Nansen suggests that the lack of demand for PYUSD could be due to PayPal targeting a different demographic or the availability of other stablecoin alternatives.
Despite the slow start, PayPal is actively working to increase adoption. It has partnered with cryptocurrency exchanges like Kraken and Coinbase to list PYUSD and enable seamless transactions. Bank of America believes that while PYUSD will improve efficiency in the crypto market over time, adoption may be slow initially due to factors like lack of wallet compatibility and competition from central bank digital currencies (CBDCs) and yield-bearing stablecoins.
PayPal aims to make PYUSD available on major exchanges and decentralized finance (DeFi) platforms to enhance adoption and meet users where they are currently utilizing stablecoins. On decentralized exchanges, however, the liquidity pools for PYUSD are relatively small.
Despite the challenges, PayPal remains committed to expanding the distribution of PYUSD. Analysts anticipate that the stablecoin will drive the adoption of digital assets and introduce new users to the cryptocurrency ecosystem, given PayPal’s expansive user base of 350 million individuals who have yet to engage with cryptocurrencies through the platform.
