Key Points:
- Tether co-founder questions PayPal’s PYUSD, doubts its potential for innovation.
- PYUSD faces challenges with low adoption and trading volume compared to competitors.
- Experts believe PayPal’s massive user base could eventually boost PYUSD’s market share.
Nearly a month after the launch of its stablecoin, doubts continue to surround PayPal’s venture into this realm, as critics question the project’s level of innovation.
William Quigly, one of the co-founders of Tether, has suggested that PayPal’s decision to introduce a stablecoin is primarily driven by the aim to enhance profitability. In a recent interview with Coindesk, Quigly expressed his belief that PayPal’s PYUSD stablecoin is unlikely to bring groundbreaking innovation, hinting that it will resemble other stablecoins in the market.
“I don’t anticipate significant innovation from PayPal,” Quigly remarked. “I believe PayPal views this primarily as a cost-saving measure. Whether they pass on some of those savings to their users remains to be seen.”
By adopting stablecoins, PayPal can reduce its dependence on financial intermediaries, potentially saving significant amounts in foreign exchange fees. All transactions will be settled on PayPal’s private blockchain, which, according to Quigly, leaves the payment service with two choices.
Quigly suggests that PayPal could either leverage the elimination of interchange fees to reduce cross-border transaction costs for users or retain all the cost savings as profit.
“PayPal can continue to charge consumers and merchants currency conversion fees on each transaction, even though they no longer incur those fees, and retain 100% of those fees as profit,” Quigly explained. “Alternatively, they could eliminate the currency conversion charges they used to impose on customers and lower overall cross-border transaction costs.”
While it remains uncertain which direction PayPal will take, Quigly took the opportunity to reflect on Tether’s early years. He noted that Tether initially started as a “charitable contribution” to the virtual currency space, specifically catering to the needs of the open-source community.
Quigly added that Tether’s earnings were supplementary to the interest rates it earned on its reserves. He further highlighted that although interest rates were at their lowest when the company commenced operations, in Q2, the stablecoin issuer generated over $1 billion in operational profit.
PYUSD Faces Challenges in Gaining Traction
Currently, PYUSD has a market capitalization of $43.4 million, significantly trailing behind Tether’s USDT and USDC. On-chain analysis suggests low adoption of PYUSD, with various factors, including its novelty, being blamed for its low transaction volumes.
“PYUSD was listed on a few centralized exchanges at the end of August, notably Coinbase and Kraken, but its daily trade volumes have been volatile and relatively low compared to other stablecoins,” noted Kaiko analyst Dessislava Aubert.
Data from CoinGecko reveals that PYUSD managed to achieve a daily trading volume of $1.2 million, a far cry from the over $13 billion daily trading volume of USDT.
Despite its slow start, experts believe that once PayPal’s vast user base of 435 million users embraces its stablecoin offering, PYUSD could capture a significant portion of the market share currently dominated by USDT and USDC.
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Disclaimer: The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.
