The mobile payment platform Venmo, managed by PayPal, recently started offering PayPal USD stablecoin (PYUSD) to select users, a major milestone in the integration of cryptocurrency with mainstream finance. Accessible via PayPal, Venmo and compatible external wallets, PYUSD is Ethereum-based and is backed by dollar deposits or liquid equivalents. With the backing of the New York State Department of Financial Services (NYDFS), PYUSD has comfortably nestled itself into major exchanges includingKraken, Coinbase and Crypto.com.
An appealing merit of this launch is the allowance for users to transfer stablecoin between PayPal and Venmo free of charge. Considering that compatible external wallets and merchants who accept Payment in PYUSD can also receive transfers from Venmo users, the inclusion of blockchain network fees seems quite reasonable.
However, despite this optimistic launch of PYUSD, its adoption has been relatively slow. A recent transparency report by Paxos, PayPal’s stablecoin issuer, discloses that the stablecoin had total net assets with a market collateral value of $45.3 million as of the end of August 2023. The document also stated that only about $1.5 million was backed by cash deposits while the bulk of reserves—$43.8 million—were collateralized with US Treasury reverse repurchase agreements.
Why the lukewarm response to PYUSD? Well, even though PYUSD has remained pegged at $1 since its inception, its growth has been a mere 0.05% compared to Tether(USDT), one of the most established stablecoins with a market capitalization of over $83 billion and trading volumes soaring above $20 billion a day.
Unsurprisingly, PYUSD is currently languishing in the 19th position among stablecoins in terms of market capitalization, according to CoinMarketCap, despite its robust foundational structure and substantial support.
The challenge of PYUSD gaining traction shouldn’t discourage its supporters. Key factors might be stiffer competition amongst stablecoins and a contradiction of regulations. This new stablecoin will likely need some time to gain traction and acceptance among users. But, despite these challenges, the potential lies in its capacity to boost global payments, promising a significant progression in the crypto world.
Source: Cryptonews
