The PayPal-backed stablecoin PYUSD (PayPal USD) is looking to expand its integration in the decentralized finance (DeFi) space by potentially joining the Aave lending protocol. PYUSD was launched in August 2022 by PayPal as part of their growing embrace of cryptocurrencies and blockchain technology. However, since its launch, PYUSD has seen waning traction and adoption.
With a current market capitalization of only $243 million, PYUSD pales in comparison to the leading stablecoin Tether’s USDT, which commands a market cap of over $93 billion. In the DeFi lending space, PYUSD is currently only integrated on the Curve protocol.
In an effort to boost PYUSD’s liquidity and utilization, PayPal is pushing for its integration on the popular DeFi lending platform Aave. There is currently an Aave governance vote underway, scheduled to end on January 11th, which would greenlight PYUSD’s inclusion. The vote is widely expected to pass.
Interestingly, despite PayPal’s clear priority of growing PYUSD, there is little evidence that PYUSD is being utilized within PayPal’s merchant network. PayPal is known to accept other major cryptocurrencies like Bitcoin and Ethereum as payment, but not its own stablecoin PYUSD at this time.
The timing of this PYUSD expansion effort lines up with anticipation of greater crypto liquidity influx from the possible approval of a spot bitcoin ETF in 2023. Although PYUSD was first-to-market as far as company-backed crypto stablecoins, its lack of traction shows PayPal has considerable work to do before it can compete with dominant stablecoins like USDT and USDC. Landing a spot on a top DeFi platform like Aave marks the next step in that journey.
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