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.
Nobody wants to mint $pyUSD because there’s not much to do with it and it doesn’t pay any interest.
– $pyUSD – $crvUSD pool
– $CRV gauge approval from Curve DAO@PayPal 🤝 @CurveFinance $PYPL #DeFi https://t.co/jVr7sN36KH pic.twitter.com/NUdsKmfY8F
— DefiMoon 🦇🔊 (@DefiMoon) 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 stablecoin maintains dollar peg | Source: PYUSD/USD on inew.news
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.”