When PayPal launched its US dollar stablecoin on August 7, everyone in the crypto industry noticed. Indeed, the 24-year-old, $68 billion fintech behemoth unveiling PYUSD conferred instant credibility onto the stablecoin industry.
However, real-world adoption of PayPal’s stablecoin has been sluggish. PYUSD already faces stiff competition from incumbents.
Older stablecoins might have shady histories yet they benefit from popular brand names, deep liquidity, Lindy effects, listings on many crypto exchanges, and fiat-denominated trading pairs around the world.
In short, the debut of PYUSD flopped. It’s barely grown to 0.05% the size of Tether, the world’s oldest stablecoin.
PayPal’s issuer Paxos just published its transparency report, disclosing PYUSD reserves of just $45.3 million as of August 31, 2023. That compares to Tether’s $83.1 billion.
PYUSD’s backing includes $43.8 million in US Treasuries plus $1.5 million in cash deposits at insured depository institutions. Unlike Tether’s repeatedly broken promises about its dollar backing, PayPal has followed through with its promise to back PYUSD with dollars, short-term US treasuries, and cash equivalents.
Moreover, PYUSD has never significantly de-pegged from $1. Unlike Tether which has traded as low as $0.001 and as high as $1,000, PYUSD boasts an all-time trading range of $0.979 to $1.01. Both trade at $1 today.
PayPal’s underwhelming PYUSD stablecoin
“PayPal chose a very interesting time to launch a stablecoin,” Ripples head of payments products Pegah Soltani told CoinTelegraph. Indeed, in February 2023, Paxos communicated with the SEC over its dealings with Binance’s stablecoin, BUSD. The New York Department of Financial Services (NYDFS) also ordered Paxos to stop issuing BUSD altogether.
Bank of America analysts have also opined that PYUSD would likely face stiff competition from CBDCs and yield-bearing stablecoins.
Interestingly, Bitcoin News found lines in PYUSD’s code that allow PayPal to freeze or wipe any PYUSD wallet on the same day that PayPal launched its stablecoin. That news quickly spread via X (formerly Twitter) and could have significantly weakened the launch of PYUSD.
The NYDFS added PYUSD to its green list of approved digital assets while removing older assets like Litecoin, Dogecoin, and Ripple.
Paxos is holding the assets used to back PYUSD in a trust designed to protect tokenholders from any bankruptcy of Paxos or PayPal.
In short, PayPal’s PYUSD has failed to gain much traction so far, with only $45.3 million in assets listed in Paxos’ first transparency report. It’s barely five one-hundredths of one percent the size of Tether. PYUSD faces stiff competition, potential regulatory hurdles, and the unpopular nature of centralized assets that can remotely freeze or erase any users’ holdings.