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PayPal Incentivizing People To Provide PYUSD Liquidity On Curve, CRV To The Moon?

In a landmark move, PayPal, the payment processor, has incentivized PYUSD liquidity on Curve Finance, the world’s largest stablecoin decentralized exchange (DEX) by trading volume. 

PayPal Incentivizing PYUSD Liquidity Via Curve

This development, which Stake DAO first captured on January 10, sent shockwaves through the crypto community, with many experts predicting that Curve is on its way to becoming the go-to platform for institutional and corporate trading of on-chain stablecoins.

PayPal incentivizes liquidity via Curve | Source: Stake DAO

PayPal’s decision to incentivize PYUSD liquidity on Curve is a significant step forward for adopting stablecoins and promoting decentralized finance (DeFi) protocols in general. By providing attractive rewards for liquidity providers, PayPal is signaling its commitment to the growth of this rapidly evolving sector.

As part of its incentive program, PayPal has deposited vote incentives worth $132k in PYUSD on Votemarket, a vote incentive platform. These rewards are designed to encourage users to increase their liquidity on Curve. In addition, PayPal will offer direct rewards to liquidity providers distributed in PYUSD, with an APY of 11%.

Observers note that the $66,000 allocated weekly to Votemarket could direct at least $55k in CRV, a governance token on Curve Finance, to the PYUSD-USDC pool.

Institutional Endorsement: Will CRV Rally Above $0.75?

With PayPal’s endorsement, Curve may attract even more liquidity and cement its position as a leader in on-chain stablecoin trading. It is unclear whether other Wall Street heavyweights on the wings are ready to enhance liquidity via Curve or other DeFi protocols. Their involvement will validate Curve and DeFi’s potential, accelerating adoption among institutional investors.

According to DeFiLlama data on January 10, Curve has a total value locked (TVL) of $1.82 billion, with a big chunk of this in Ethereum. The protocol has deployed in Ethereum layer-2s and other Ethereum Virtual Machine (EVM) compatible platforms, including Arbitrum.

Curve TVL | Source: DeFiLlama

For now, CRV, the native token of Curve, remains under pressure. Looking at the performance in the daily chart, the token is down 30% from recent December peaks, sliding when writing. 

Curve price trending downward on the daily chart | Source: CRVUSDT on Binance, TradingView

From price technical analysis, any break above $0.75 could spark more demand, lifting the token to new 2024 highs. Presently, CRV is trending inside a bear candlestick, signaling general weakness. In the short term, sharp losses below $0.45 might trigger a sell-off. CRV risks dropping to September 2023 lows of around $0.40 in that case.

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PayPal’s PYUSD Report Provides Valuable Insight Into The Stablecoin’s Performance So Far

A new report has shown that the adoption of PayPal’s PYUSD stablecoin has seen less than favorable adoption rates since its inception. The crypto community remains skeptical about employing the new stablecoin for daily crypto payments and has opted for top competitor stablecoins like USDT and USDC. 

PYUSD Experiences Sluggish Adoption Rate

Global payments giant PayPal released its transparency report for its stablecoin, PYUSD, and the analysis of the report reveals that the PYUSD stablecoin may not be seeing as much adoption as PayPal and PYUSD stablecoin issuer, Paxos hoped for. 

Paypal launched the US dollar-backed stablecoin on August 7 which was designed to increase stablecoin offerings and facilitate the adoption of crypto payments to crypto users as well as consumers and merchants actively utilizing PayPal’s financial platform globally.

However, despite coming from one of the largest players in the payments space, the PYUSD stablecoin remains a relatively small player in the cryptocurrency market, especially when compared to industry heavyweights like Tether (USDT) and USD Coin (USDC).

A Kaiko analyst, Desislava Aubert stated to Decrypt that despite being listed on prominent exchange platforms like Coinbase and Huobi Global, the PYUSD stablecoin’s adoption rate has been progressing slowly, and its daily trade volumes have been fairly low. 

“PYUSD was listed on some centralized exchanges in late August, notably Coinbase and Kraken, but its daily trading volume has been volatile and significantly lower than other stablecoins. Overall, this points to sluggish demand,” Aubert stated. 

The PayPal USD stablecoin was issued by Paxos Trust Company, a technology company specializing in blockchain in August. Paxos has reported that it holds $45.3 million in assets supporting the PYUSD stablecoin. 

The stablecoin is also reportedly backed with over $1.5 million in cash deposits. The majority of the coin’s reserves, approximately $43.8 million have been collateralized with the US Treasuries as reverse purchase agreements. 

Currently, PYUSD has a market capitalization of $44 million, suggesting that the stablecoin’s adoption rate has been subpar due to its failure to catch and retain the attention of the crypto community. 

Crypto Investors Opt For Top Stablecoins

The decline in acceptance and adoption of the PYUSD may be attributed to the unfamiliarity of the cryptocurrency as a new stablecoin. The stablecoin market is also heavily saturated with well-established cryptocurrencies like USDT, USDC, and others. 

Given this, a large number of crypto investors are presently opting for these top stablecoins to facilitate their cryptocurrency transactions. This is further propelled by the fact that these stablecoins have created a considerable reputation for themselves over the years due to their reliability and sustainability.

Presently, USDT has a market capitalization of over $83 billion and USDC has a market cap of $26 billion. At the time of writing, USDT stablecoin’s 24-hour trading volume is over $22 billion as compared to PYUSD stablecoin’s 24-hour trading volume of only $3.2 million. 

Despite PYUSD’s sluggish adoption rate, PayPal remains committed to its cryptocurrency ventures. The payment giant has expanded into different regions globally using its brand name and reliable reputation as an international financial service provider to facilitate crypto adoption and awareness among users in different countries.

PayPal PYUSD price chart from Tradingview.com (Stablecoin)

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PayPal’s PYUSD Fails To Capture Interest: 90% Of Supply Remains In Paxos’ Wallet

Paypal’s Ethereum-based stablecoin PYUSD has failed to capture crypto investors’ interest. According to data from Nansen, 90% of the stablecoin’s total supply still remains with its issuer Paxos’ wallet.

Paypal’s PYUSD Adoption Setback

The payment giant Paypal’s recently launched stablecoin PYUSD continues to struggle with adoption and has failed to gain traction since its official launch on August 7, 2023.

Despite PayPal having over 350 million users worldwide, on-chain data from Nansen has shown that only a small percentage of its user base is currently using and holding the PYUSD in self-custody wallets.

“On the surface there’s a lack of demand from crypto users for PYUSD when other alternatives exist,” said Nansen in a report.

However, it is believed that lack of enthusiasm might involve the stablecoin’s lack of utility and not being able to earn interest on the stablecoin, as highlighted by an X (formerly Twitter) user in a post on August 26, 2023.

The stablecoin’s holdings on crypto exchange wallets are also low, accounting for just about 7% of the stablecoin’s total supply. This percentage takes into account the balances on centralized exchanges such as Kraken, Crypto.com, and Gate.io.

Despite the high expectations in the crypto industry following the release of the stablecoin that it would actually promote wider adoption and introduce cryptocurrencies to the masses for the first time, the stablecoin has failed to live up to expectations and smart money investors seem perfectly comfortable to circumvent the stablecoin. 

The largest holder of the stablecoin holds less than $10,000 worth of PYUSD after the holder sold about 3 meme coins to purchase the stablecoin. Excluding contracts or exchanges, not more than 10 holders have a balance surpassing $1,000.

According to Coinmarketcap, PYUSD has a total supply of 43 million PYUSD tokens and pools in decentralized exchanges like Uniswap’s PYUSD/USDC and PYUSD/wETH accounts to only 50,000 PYUSD tokens respectively.

The PYUSD tokens have been criticized for being overly centralized, as the majority of its total supply turns out to be stored on centralized exchanges, resulting in difficulty in growing its circulation.

Despite such a high total supply, the collective total number of the stablecoin’s holders according to Etherscan is merely 324 at the time of this writing.

PayPal's PYUSD price chart from Tradingview.com (PayPal stablecoin)

Expectations On Ethereum For The Stablecoin

According to JP Morgan analyst Nikolaos Panigirtzoglou, following the first week of Paypal’s stablecoin launch, Ethereum enjoyed no benefit from PYUSD when looking at things such as increased network activity, increased Total Value Locked (TVL), and enhancing Ethereum’s network utility as a stablecoin/DeFi platform.

Crypto experts and enthusiasts have also criticized PayPal for choosing Ethereum for its stablecoin due to the blockchain’s high transaction fees.

Co-founder of Sei Network Jayendra Jog said, “The gas fees of using PYUSD will be ridiculous, which will disincentivize its usage.”

He further added, “To help make the user experience better, PayPal will either need to subsidize transaction costs or will need to help support PYUSD on other networks with cheaper gas fees.”

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US Congresswoman Raises Concerns About Paypal Stablecoin In The Absence Of Regulation

Earlier this week, popular American payment giant Paypal unveiled the launch of its USD-pegged PYUSD stablecoins to investors. In response, Democrat congresswoman Maxine Waters has raised palpable concerns that may or may not threaten the stablecoin’s operations.

Waters Raises Regulatory Concerns

Reacting to the news of Paypal’s PYUSD stablecoin launch, congresswoman Maxine Waters noted that the launch comes at a time when there was no legislative mechanism to regulate these assets. 

She stated that “given PayPal’s size and reach, federal oversight and enforcement of its stablecoin operations is essential in order to guarantee consumer protections and alleviate financial stability concerns.” She further noted that “stablecoins represent the issuance of a new form of money, making it integral that there are federal guardrails.” 

Waters’ recent comments are in contrast with those of the House Financial Services Committee Rep. Patrick McHenry, who had earlier lauded PayPal’s launch. According to him, the recent announcement was “a clear signal that stablecoin, if issued under a clear regulatory framework, holds promise as a pillar of our 21st century payment system”

Last month, the US House Financial Services Committee also introduced a bill to set up a federal regulatory framework for stablecoins, focusing on guidelines for registration and licensing for stablecoin issuers. 

Although stablecoins have been around for several years, they have not been able to enjoy significant attention within the mainstream consumer payment ecosystem. Similar efforts by popular non-cryptocurrency firms, such as Meta Platforms, to launch stablecoin services faced harsh resistance from policymakers and global financial regulators. 

In the face of regulatory uncertainty, it is always critical whenever a lawmaker has something to say about virtual currencies.

PayPal stock price chart from Tradingview.com (PYUSD)

PayPal To Expand Into The Growing Stablecoin Industry

According to a report published on August 9 by popular market analyst Bernstein, the stablecoin industry is projected to reach a $2.8 trillion valuation in the next five years. This represents a whooping 22x increase from the present $125 billion valuation of the industry, and PayPal is looking to take advantage of this expected increase through its recent release of the PYUSD stablecoin. 

The leading payment giant revealed that the stablecoin will be “100% backed by US dollar deposits, short-term US Treasuries, and similar cash equivalents.” The coins will be redeemable 1:1 for US dollars and issued by US-based Paxos Trust Co. Consumers will also be able to convert any crypto supported by PayPal to and from PayPal USD (PYUSD).  

However, aside from the current legislative tussle, PayPal will also face competition from existing players such as Tether and Circle. Tether’s USDT and Circle’s USDC are the largest stablecoins, with market caps of over $83 billion and $26 billion, respectively. 

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Can PayPal’s PYUSD Be Frozen In Your Wallet Like Tether’s USDT?

PayPal and Paxos dominated the news cycle on Monday with the announcement of the launch of the PayPal (PYUSD) stablecoin, but concerns have been raised about the possibility of user assets being frozen in their wallets, as is the case with USDT.

Crypto Community Adverse to Paxos Wallet Freeze Feature

The PYUSD stablecoin issued by Paxos has a condition that is not too welcomed by the crypto community, which has dulled the initial excitement for the launch of the PayPal stablecoin. According to reports, Paxos, a blockchain infrastructure firm that issued the PYUSD has several centralization issues which give them a certain amount of control over user’s wallets. 

Information published on its GitHub account reveals that Paxos can freeze or suspend users’ wallets and transfer functions on PYUSD authorization in the case of a security threat. The Paxos freeze feature is quite similar to Tether’s USDT which is able to freeze/blacklist users’ addresses involved in fraudulent activities. Additionally, Paxos can withhold users’ funds and assets, as well as wipe the account clean if the law requires it. 

The reactions from the crypto community were instant and not too favorable as investors’ anxiety spiked at the thought of possibly losing their substantial digital assets or having their wallets on lock. 

Centralization has always been a touchy subject for the crypto community as decentralized networks are often believed to be more secure and distribute control among network participants rather than a central body. 

Paxos has stated that freezing accounts is unlikely to happen often, and the company itself would not execute the process. 

PayPal stock price chart from Tradingview.com (PYUSD Stablecoin)

PayPal Launches PYUSD Stablecoin

Global payment giant PayPal recently unveiled its latest innovation, the PayPal USD (PYUSD) stablecoin, on August 7, in collaboration with Paxos, a New-York based blockchain infrastructure company. The news comes as a significant development for the Paxos ecosystem, as the integration of cryptocurrencies into the financial industry continues to grow. 

The crypto community has largely welcomed this new development, as investors and traders are gearing up to take advantage of the token and its conveniences. Analysts also predict that popular cryptocurrencies like Bitcoin and Ethereum prices will also benefit significantly from the new stablecoin. 

The PYUSD is an ERC-20 token developed on the Ethereum blockchain backed by the US dollar. Launching PayPal’s stablecoin is expected to help make crypto trading and offerings easily accessible on the payment platform. 

With PayPal’s user base reaching 400 million in 2022, the PYUSD stablecoin launch will also help facilitate crypto adoption and awareness, exposing a significant portion of the global population to digital currencies. 

President and CEO of PayPal, Dan Schulman, commented, “The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar. Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.”

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PayPal’s PYUSD Launch Triggers Calls For Stablecoin Bill

United States Republican Patrick T. McHenry, Chair of the House Financial Services Committee, has released a statement calling for the need to pass the Stablecoin Bill in the wake of PayPal’s launch of its own stablecoin PYUSD. 

The Call For A Stablecoin Law

According to the statement, McHenry believes stablecoins are the “pillar of our 21st-century payments system.” However, they must be regulated to reach their full potential. 

 Part of the statement read:

This announcement [Paypal’s PYUSD Launch] is a clear signal that stablecoins—if issued under a clear regulatory framework—hold promise as a pillar of our 21st century payments system,” said Chairman McHenry. “Clear regulations and robust consumer protections are essential to enabling stablecoins to achieve their full potential. That’s why it’s more important than ever that Congress enact legislation to provide comprehensive digital asset regulation, especially for stablecoins.”

McHenry also recognizes the role of Congress in providing regulatory certainty to the crypto industry and the need to enact these laws that can keep the US at the “forefront of digital innovation.”

The bipartisan Clarity for Payment Stablecoins Act recognizes the strong role that states have played in regulating digital asset firms and builds on successful state regimes, like New York’s. We are currently at a crossroads to keep America at the forefront of digital asset innovation. Congress is making significant, bipartisan progress on legislation to ensure the U.S. leads the financial system of the future. We must finish the job.

The bipartisan Clarity for Payment Stablecoins Act, which was advanced by the House Financial Services Committee last month, is a legislative framework that seeks to regulate payment stablecoins. Many will be hoping that this bill could spearhead the passing of other crypto-related bills. 

PayPal Continues Journey Into Web3

On August 7, payment platform PayPal announced the launch of its dollar-backed stablecoin, PayPal (PYUSD), in collaboration with Paxos (Paxos also happens to be the issuer of Binance’s BUSD). This is part of Paypal’s efforts to increase its Web3 offerings as the company believes that fully-backed, regulated stablecoins can transform payments in the Web3 space.

“The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar,” said Paypal’s President and CEO Dan Schulman. “Our commitment to responsible innovation and compliance, and our track record delivering new experiences to our customers, provides the foundation necessary to contribute to the growth of digital payments through PayPal USD.”

This isn’t Paypal’s first attempt at launching a stablecoin. In 2021, the company explored the possibility of launching a stablecoin but faced a setback following heightened regulatory scrutiny from the US Securities and Exchange Commission (SEC). 

Crypto Total Market Cap chart from Tradingview.com (PayPal PYUSD stablecoin)