The usage of PayPal’s dollar-backed stablecoin, PYUSD, in decentralized finance (DeFi) is gaining momentum. A newly introduced liquidity pool on the automated market maker (AMM) platform Curve, featuring PYUSD, has amassed a total value locked (TVL) of $135 million, making it the third-largest pool behind the widely popular 3pool.
The FRAXPYUSD pool, launched on December 27, combines PYUSD, issued by regulated company Paxos, and Frax Finance’s collateralized algorithmic stablecoin FRAX. This pool allows traders to swap FRAX for PYUSD and subsequently use the acquired coin on the PayPal app for various transactions. As of now, the pool exhibits an imbalance, with FRAX constituting over 80% of the total liquidity.
Frax Finance’s founder, Sam Kazemian, explained that “FRAX is kind of like the on-chain liquidity for PYUSD, and the latter is the offchain fiat ramp.” The pool has seen an average daily trading volume of $5.5 million since its inception.
While PYUSD, introduced by PayPal in August, is gradually making its way into DeFi, it still trails behind industry leaders Tether and Circle by a significant margin. Data from Kaiko reveals that PYUSD’s daily trading volume peaked at $9 million in December but currently stands around $4 million, compared to Tether’s USDT, which records a 24-hour trading volume exceeding $55 billion.
Clara Medalie, research director at Kaiko, sees the growth in DeFi liquidity as a positive sign but notes the fierce competition from USDT and USDC in the market. Despite this competition, PayPal appears to be investing resources to expand PYUSD’s usage in crypto trading activities beyond just payments within the PayPal app.
Sam Kazemian envisions further growth for the FRAXPYUSD pool, with Frax Finance exploring potential DeFi integration supported by PayPal’s payment app. He envisions a scenario where users can open their PayPal app, save in PYUSD and Frax within Curve, and earn yield on their holdings.