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Despite the slow uptake, the transparency report suggests that PYUSD is effectively backed up by reverse repurchase agreements.
PayPal unveiled its PYUSD stablecoin on August 7. The coin was issued by Paxos Trust Co and fully backed by US dollar deposits, short-term Treasurys and similar cash equivalents. Immediately, there was a 26% spike in PayPal’s shares suggesting investor confidence. However, the spike has failed to translate into significant market adoption.
PYUSD Market Capitalization Suggests Slow Adoption
PayPal has over 350 million active users. Despite this, PYUSD has a current market capitalization of $43.4 million. Comparatively, market leaders USDC and USDT are valued at $83 and $26 billion, respectively.
Again, PYUSD’s trading volume in the past 24 hours stands at $3.1 million whereas $22.1 billion USDT and $3.2B USDC have traded hands within the same time frame.
According to Kaiko analyst Dessislava Aubert, these patterns point to a sluggish demand. Aubert said:
“Its daily trade volumes have been volatile and quite low compared to other stablecoins.”
Ticking All the Right Boxes
Despite the slow uptake, the transparency report suggests that PYUSD is effectively backed up by reverse repurchase agreements. These are collateralized with US Treasuries and valued at $43.8 million. Paxos also has over $1.5 million in cash deposits. Again, the company is planning an independent attestation of its report by WithumSmith+Brown, PC.
Some users believe the report helps establish the credibility of the stablecoin. This could be important in a market that has crippled investor trust.
Recall that Terra UST’s implosion last year led to a decline in the stablecoin market. Earlier this year, USDC lost its dollar peg for a bit amid the failure of Silicon Valley Bank. Similar concerns have also been raised about USDT’s ability to maintain its dollar peg.
Consequently, from $188 billion last May, the total stablecoin market rests at $131 billion today. For such a market, transparency has become key. Commenting on the transparency report, one X user said, “That’s significant news for the crypto space, especially for those who use or are considering using PYUSD.” The user believes the report adds a layer of trust and stability to the stablecoin.
Aside from the transparency report, PayPal has also been making various moves, including setting up a crypto hub and establishing a USD off-ramp for its users.