- PayPal’s PYUSD stablecoin has seen slow adoption, with a market cap just 5% of that of Tether
- PYUSD’s backing consists of over $1.5 million in cash deposits and $43.8 million in reverse repurchase agreements backed by US Treasuries.
- The general stagnation of the crypto market and the implosion of the UST stablecoin are having an impact
When PayPal launched its PYUSD stablecoin in August there were plenty who warned about private companies entering the mass-adoption stablecoin space. It seems they needn’t have worried, however, at least initially; PYUSD issuer Paxos has revealed that the token is backed by just $45.3 million, compared to the $83 billion supposedly held by the biggest stablecoin, USDT. Paxos’ first report on the stablecoin shows that uptake of PYUSD has been slow in the initial month, although this could be down to the stagnation of the crypto market as much as anything PYUSD-related.
$45 Million Market Cap
Paxos revealed in its report yesterday that PYUSD is backed by around $1.5 million in cash with the majority being reverse repurchase agreements backed by US Treasuries worth $43.8 million. Reverse repurchase agreements are essentially collateralized loans involving trades with reputable financial institutions, reducing the risk of loss.
Despite its listing on exchanges such as Coinbase and Kraken, PYUSD’s daily trading volume remains low, suggesting sluggish demand compared to established stablecoins. For example, the past 24 hours has seen around $1 million in PYUSD trading volume while USDT and USDC traded nearly $12 billion and $5 billion respectively during the same time frame, indicating cautious adoption of PYUSD in the crypto market.
Market Stagnation Makes for Unfair Test
This slow uptake may not be all PYUSD’s fault, however, given that the stablecoin market has seen a decline in overall market capitalization since Terra’s UST implosion last spring, dropping from $188 billion to $131 billion.
Earlier this month, European Central Bank Executive Board member Fabio Panetta opined that private providers of payment services such as PayPal “have no incentive to limit the take-up of their stablecoins or the range of services they provide” adding that “their objective is to expand their customer base and gain market share.” This may be true, but the early signs are that his worst-case scenario may be some way off.
