PayPal recently launched its stablecoin, PYUSD, sending ripples through the cryptocurrency market. As the issuer of USDT, the current market leader with an $80 billion valuation, Tether remains unfazed by this new competitor. This article explores the potential impact of PYUSD on USDT's dominance and why the latter’s position may remain unchallenged.
PayPal’s Foray into Cryptocurrencies
In 2021, PayPal announced support for Bitcoin and Ethereum payments in the U.S., fueling the bull market at the time—though the hype soon faded.
Fast forward to 2023, PayPal unveiled PayPal USD (PYUSD), a dollar-backed stablecoin issued by fintech firm Paxos. PYUSD will gradually roll out to U.S.-based PayPal users, allowing seamless conversion to USD and facilitating crypto transactions on PayPal’s platform, including Bitcoin purchases.
But can PYUSD leverage PayPal’s global reach and vast payment networks to challenge established stablecoins like USDT?
Our answer: Unlikely.
Why PYUSD Won’t Threaten USDT
1. Market Focus: U.S. vs. Global
- PYUSD: Primarily targets the U.S. domestic market.
- USDT: Excludes U.S. users, focusing instead on emerging markets and cross-border trade.
Paolo Ardoino, CTO of Tether, commented:
"We expect zero impact on USDT. PYUSD caters to U.S. users, while Tether doesn’t operate there."
If PYUSD expands internationally, Ardoino sees it as positive for crypto adoption, potentially disrupting traditional payment giants like Visa and Mastercard while pushing for clearer regulations.
2. Liquidity Reigns Supreme
USDT’s dominance isn’t rooted in transparency—it thrives on liquidity.
- Crypto Markets: Most exchanges and DeFi platforms use USDT as the base trading pair.
- Real-World Use: USDT has permeated global trade, gambling, gaming, and gray markets, making it indispensable in regions like Asia-Pacific.
Academic research suggests too much transparency could destabilize stablecoins.
"If users knew USDT’s reserves were held in a troubled bank, they’d flee—opaque systems ironically foster trust."
— Mikko, Monetary Scholar
3. Lessons from Past Stablecoin Rivals
In 2018, NYDFS-approved stablecoins GUSD and PAX entered the market with full transparency and compliance. Yet, neither dented USDT’s dominance.
Why?
- Adoption > Regulation: Merchants and traders prioritize ease of use over regulatory perfection.
PYUSD’s Niche: Compliance & New Users
While PYUSD won’t dethrone USDT, it offers unique value:
✅ Regulated on/off-ramp for USD.
✅ Mass-market adoption via PayPal’s 340M+ users.
✅ Potential to bring fresh capital during crypto bull runs.
The Bottom Line
- USDT: Remains the liquidity king for global crypto and gray markets.
- PYUSD: Targets U.S. retail and compliant transactions.
👉 Discover how stablecoins are reshaping finance
"Bitcoin and Ethereum were groundbreaking, but stablecoins are crypto’s true killer app."
FAQ
Q1: Can PYUSD overtake USDT in trading volume?
A: Unlikely—USDT’s deep liquidity and global acceptance give it an edge.
Q2: Will PYUSD impact USDC?
A: Possibly. As a U.S.-centric stablecoin, PYUSD may compete more directly with USDC than USDT.
Q3: Is USDT’s lack of transparency a risk?
A: Paradoxically, opacity has helped USDT avoid bank-run panics.
👉 Explore the future of stablecoins