PayPal entered the stablecoin market on August 7, 2023, and was welcomed by many in the industry. Circle CEO Jeremy Allaire said that competition from PayPal was “great.”
News of the launch caused a slight 4% jump in Bitcoin prices, and within days, the exchange was offering low-fee promotional opportunities to traders willing to use PayPal’s PYUSD. Before the end of August, Coinbase, Kraken and HTX had listed the stablecoin, and Venmo support was added a month later.
Five months after its launch, PYUSD now occupies the eighth position on the global stablecoin chart and surpassed the $300 million mark around January 22. However, in order of trading volume, PYUSD fell to eleventh place overall, with only $10 million in 24-hour trading volume. That puts it just slightly ahead of UST Classic, which is trading 98% below its original $1 peg and has seen just $500,000 less in trading volume over the past day.
Still, it’s impressive that the value of PYUSD locked in PayPal climbed to $300 million in five months. In addition to the increase in market capitalization, the token’s on-chain activity is also stable, with 200 to 400 transactions per day.
However, as the table and chart below show, PYUSD has yet to break into the DeFi space in any meaningful way. Most of PYUSD’s liquidity resides on centralized exchanges, with Crypto.com being the largest single holder of the token, worth $113 million, or just over a third of the total market capitalization.
The visualization below depicts transactions between major entities specifically for PYUSD. Entities holding larger amounts of PYUSD are larger than entities holding smaller amounts. The unmarked entity on the far right is an unknown wallet holding over $30,000. The logo in the upper right corner depicts a business entity token, possibly a treasury asset.
Interestingly, there are many connections between PYUSD issuers Paxos, Uniswap and Curve. However, these entities are not subsequently linked to major exchanges, indicating that PYUSD’s DeFi and CEX ecosystems are completely independent.
Although PayPal was subpoenaed by the SEC when PYUSD’s market capitalization was only half its current market capitalization, PayPal has reportedly complied with the request but little has been heard about the matter since. The release of the document also marked a local low for PayPal shares, which have risen 24% since November.
In addition, PayPal Ventures recently began using the PYUSD stablecoin as a strategic investment mechanism, using it to invest in the institutional encryption platform Mesh. Amman Bhasin, Partner at PayPal Ventures, commented:
“As the world of financial services undergoes rapid transformation, we believe user ownership and asset portability will become key components of product innovation, and cryptocurrencies will be the first beachhead to achieve this.”
So while PYUSD is still a long way from catching up with giants like Circle and Tether, this debuting web2 disruptor is certainly cementing its place in the industry.
