According to Blockworks, PayPal's PYUSD stablecoin, which launched in August, has been struggling to gain traction in the competitive stablecoin sector. To boost its liquidity, the token's issuer is exploring decentralized finance (DeFi) opportunities. Aave, a lending protocol, is conducting a community temperature check on the potential onboarding of PYUSD into its Ethereum pool, with the initial vote ending on January 11th. This follows PYUSD's activation on the automated market maker Curve in late December.
PayPal's entry into the stablecoin market was significant, as it became the first major financial institution to offer the price-pegged crypto instrument. However, with Tether and Circle's stablecoin offerings already processing tens of billions of dollars per day, the question of PYUSD's use remains. PayPal's marketing language suggests the firm intends for the stablecoin to be used for payments and within the PayPal app, according to Clara Medalie, head of growth at DeFi research firm Kaiko.
Data from CoinGecko shows that PYUSD is the twelfth-largest stablecoin by market capitalization, with its circulation growing by 63% over the past month. However, its trading volume of roughly $17 million in the past 24 hours is far behind competitors like Tether and Circle. PYUSD is issued by Paxos, a New York-based crypto firm that previously issued Binance's BUSD stablecoin.
In late 2024, Paxos began working with institution-focused crypto platform Trident Digital to boost PYUSD's on-chain liquidity. Trident was responsible for the PYUSD activation on Curve and is behind the current Aave proposal. If the Aave proposal passes, Paxos and other parties would seed the pool with $5-10 million in liquidity, according to Trident's governance proposal. As PYUSD seeks to gather enough liquidity to compete with established stablecoin giants, DeFi appears to be a starting point.