When PayPal announced PYUSD last month, it highlighted the stablecoin’s potential for global payments. However, the token’s first transparency report suggests that PYUSD has a long way to go in its adoption, even as it faces competitors with their own issues.
Paxos Trust, the company that issues PayPal’s stablecoin, Said As of the end of last month, it had $45.3 million in assets backing PYUSD. The report, released last week, represents the public’s first survey of assets related to 44.3 million PYUSD.
According to the report, PYUSD was backed by just over $1.5 million in cash deposits, but the majority of the currency’s reserves were reverse repurchase contracts backed by U.S. Treasuries, worth $43.8 million. Ta.
A reverse repurchase agreement is effectively a secured loan, in which one institution sells securities to another institution with the expectation that they will be bought back at a certain price (usually a higher price) in the future.
As Paxos points out, the company’s contracts include transactions with “reputable financial institutions” with overnight maturities, ultimately reducing the risk of loss to a level that is “deemed immaterial.” be done.
Stablecoins are digital assets that are pegged to the price of a sovereign currency, such as the US dollar. Additionally, some major stablecoins are often backed by a combination of liquid assets such as cash and government debt, backing billions of dollars in assets.
However, since the explosion of Terra’s UST stablecoin last spring, the overall market capitalization of stablecoins has been steadily declining. According to , the total value of stablecoins has fallen from about $188 billion in May last year to $131 billion currently. CoinGecko.
Circle’s USD coin, the second-largest stablecoin in cryptocurrencies, is facing headwinds. prolonged This has been the case since the token temporarily lost its $1 fixed price following the Silicon Valley Bank collapse in March. And recently, Concerns Analysts at research firm Kaiko have questioned whether Tether will be able to sustain $1 consistently.
Terra’s UST is algorithmic stablecoin. By trading incentives in another coin, LUNA, we were able to keep the value of UST constant (until it wasn’t). 2 coins 60 billion dollars The implosion has pushed cryptocurrencies firmly into a bear market and sparked calls for a US stablecoin bill.
Representatives such as Maxine Waters (D-Calif.) Said PayPal should have waited for the legal and federal framework to be in place before launching PYUSD. However, since Paxos is regulated under the New York State Department of Financial Services, PayPal has worked to properly register the product in the Empire State.
When PayPal entered the stablecoin space, the payments company said its offering would be based on a transparent and reliable foundation. In the initial announcement of PYUSD, PayPal emphasized Reports on reserves will be a mainstay of this product’s monthly pace.
But despite its well-known brand and commitment to transparency, PYUSD’s current market cap of $43.4 million is a bucket-lister when compared to stablecoin leaders USD Coin (USDC) and Tether (USDT). It represents the lack of.
USDC and USDT are valued at $83 billion and $26 billion, respectively, and account for 90% of the stablecoin market. CoinGecko. On the other hand, PYUSD’s market capitalization is only a few percent.
Stablecoins have been garnering attention for their usefulness in cross-border payments and remittances, but sources say the technology is also frequently used by people conducting crypto transactions. recent reports From Kaiko.
The report found that all but 26% of transactions on centralized crypto exchanges, be it Coinbase or Binance, for example, do not use stablecoins. PayPal’s transparency report on PYUSD was released ahead of several listings, but so far adoption has remained slow, said Desislava Ober, an analyst at Kaiko. Decryption.
“PYUSD was listed on several centralized exchanges at the end of August, especially Coinbase and Kraken, but its daily trading volume is volatile and quite low compared to other stablecoins,” she said. Stated. “Overall, this indicates weak demand.”
According to the report, the trading volume of PYUSD reached approximately $1.2 million in the past day. CoinGecko. For reference, as of this writing, in the past day he has had $14 billion worth of Tether and $6 billion worth of his USDC traded.
The majority of the token’s volume is concentrated in HTX (formerly known as Huobi) across three trading pairs worth $740,000 in volume. On Coinbase and Kraken, PYUSD recorded volumes worth $86,000 and $87,000, respectively.
among them first look PayPal acknowledged on PYUSD that most of the stablecoin’s trading volume comes from “web-native environments” and said the token will be compatible with that ecosystem from day one. However, amidst the chill of the crypto winter, traders are likely taking the time to warm up to PYUSD.
