PayPal USD Stablecoin Chooses Solana after Ethereum—But Why?

Payment solutions provider PayPal’s ambitious stablecoin PYUSD will now be available on the Solana (SOL) blockchain.

PayPal said that it specifically chose Solana because the blockchain offers fast settlement times, high throughput and low fees.

With a block time of 400 milliseconds, transactions settle within seconds. It allows merchants and consumers near-immediate access to funds. 

The other reasons why PayPal chose the Solana blockchain for its PYUSD stablecoin are:

• Token Extensions: Solana offers token extensions which are essentially compliance in a box. Unlike other blockchains, which require institutions to use third party tools for added features, Solana’s token extensions are readily available to any stablecoin developer, natively in the protocol. 

  
   

• Confidential Transfers: Solana lets merchants maintain confidentiality of stablecoin transaction amounts while maintaining visibility of other transaction details for regulatory purposes. 

  
   

• Transfer Hooks: Solana enables developers to invoke custom programs during token transfers for individuals and merchants using PYUSD. 

  
   

• Memo Fields: Solana empowers PYUSD senders and receivers to include information along with payments, creating a more user-friendly experience for daily payments and business transactions. 

Can a FinTech Company Disrupt the Stablecoin Market?
 

Among the stablecoins, only Tether (USDT) and Circle’s USD Coin (USDC) rank among the top 10 cryptocurrencies in terms of market capitalisation.

However, both Tether and Circle are crypto-focused crypto firms. PayPal, on the other hand, is a global fintech company offering online payment solutions in many countries.

Did you know? The launch of the PYUSD stablecoin marked the first time that a large fintech brand introduced its own cryptocurrency in the digital economy. 

PayPal launched the PYUSD stablecoin on the Ethereum (ETH) blockchain in August 2023.

• It is issued by Paxos Trust Company, the same company that issued the Binance stablecoin (BUSD).
   
• PYUSD is an ERC-20 token, pegged against the U.S. Dollar.
   
• It is backed by dollar deposits, short-term US treasuries, and cash equivalents.
   
• The current market capitalisation of the PYUSD stablecoin is only a little under $400 million, making it the 174th largest cryptocurrency.
   
• The current supply of PYUSD on Solana is $5 million. 

The growth of PYUSD’s market cap over the last few months has been steady.

Towards the end of the last year, its market cap stood around $159 million. However, the approval of Bitcoin (BTC) exchange-traded funds (ETFs) in the United States in January 2024 led to PYUSD’s market cap surging nearly 2x to more than $300 million.

Related: Bitcoin Exchange-Traded Funds

In March, the stablecoin’s market cap retreated to as low as $188 million. However, April brought a substantial recovery.

The news of ether ETFs getting approved in the U.S. market has led to PYUSD’s market cap surging to as high as $398 million of late.

Though it’s a steady progress, PYUSD is still nowhere as close as USDT or USDC. The expectation was certainly higher.

We will see if the addition of PayPal’s stablecoin to Solana can change the dynamics of the broader stablecoin market.