PayPal’s PYUSD Stablecoin Tops $4 B Market Cap and Becomes Arbitrum’s Fourth‑Largest Dollar‑Pegged Token
April 2024 – DeFi Pulse
PayPal’s native stablecoin, PYUSD, has breached the $4 billion total market‑capitalisation mark this month. At the same time, the token’s presence on the Ethereum layer‑2 Arbitrum One has grown enough to place it fourth among dollar‑pegged assets on the network, trailing only USDAI, USDC and USDT.
What the numbers say
- Overall size – PYUSD’s circulating supply now exceeds $4 billion, according to on‑chain analytics aggregated by major data providers.
- Arbitrum footprint – Roughly $220 million to $257 million of PYUSD is held on Arbitrum One, making it the fourth‑largest stablecoin on the L2 platform. The figure comes from Entropy Advisors’ Dune dashboard and is corroborated by DefiLlama’s token‑tracking charts.
- Network context – Arbitrum One remains the most secured Ethereum L2, with $16.8 billion in total value secured (L2Beat, February 2024).
The rapid climb on Arbitrum is closely tied to a strategic partnership announced in December 2023 between PayPal and Permian Labs, the team behind the USDAI stablecoin.
The PayPal – USDai partnership
Under the agreement, PYUSD is now used as a reserve asset and as a settlement‑liquidity layer for USDAAI, a protocol hosted primarily on Arbitrum that funds AI‑infrastructure projects such as GPU farms and data‑center rentals.
Key elements of the deal include:
| Feature | Detail |
|---|---|
| Reserve role | PYUSD is added to USDAI’s reserve basket, providing additional backing for the latter’s peg. |
| Settlement rail | Loans issued by USDAI can be repaid in PYUSD, which can then be transferred directly into PayPal accounts. |
| Liquidity incentive | Up to $1 billion of PYUSD deposited into USDAI will earn a 4.5 % annual percentage yield for one year, as a liquidity‑bootstrapping program. |
Data from DefiLlama shows that more than 43 % of USDAI’s total token deposits are PYUSD, second only to WrappedM (WM), the protocol’s native base asset, which accounts for about 56 % of the TVL. Almost the entire PYUSD balance on Arbitrum is locked inside USDAI contracts.
Why the growth matters
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PayPal’s deeper DeFi foothold – Crossing the $4 billion threshold signals that PayPal’s stablecoin is transitioning from a primarily payment‑gateway token to a credible DeFi asset. The integration with USDAI gives the company a direct line to high‑growth, AI‑focused lending markets.
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Layer‑2 adoption acceleration – The influx of a major fiat‑backed stablecoin onto Arbitrum validates the L2’s utility for large‑scale, low‑cost transactions. It also diversifies the stablecoin ecosystem beyond the USDC/USDT duopoly, offering users more options for collateral and settlement.
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AI‑infrastructure financing – USDAI’s mission to fund GPU and data‑center capacity ties real‑world compute demand to crypto liquidity. By supplying PYUSD as a settlement asset, PayPal positions itself at the intersection of traditional finance and emerging AI‑compute financing.
- Yield incentives vs. sustainable returns – While the 4.5 % APY incentive is attractive, USDAI’s documentation makes clear that the high‑yield program is temporary, intended to bootstrap liquidity. Long‑term yields are expected to come from AI‑backed lending, which may present different risk‑return dynamics for PYUSD holders.
Key takeaways
- Market cap milestone: PYUSD’s $4 billion valuation confirms its status as a major stablecoin in the broader crypto market.
- Arbitrum ranking: With roughly $250 million on Arbitrum, PYUSD is now the fourth‑largest dollar‑stablecoin on the network.
- Strategic synergy: The PayPal‑USDai partnership embeds PYUSD in a niche DeFi protocol focused on AI infrastructure, expanding its utility beyond conventional payments.
- Liquidity boost: A limited‑time 4.5 % APY on PYUSD deposits into USDAI is likely to attract further capital, but participants should monitor the transition to the protocol’s core AI‑lending model.
- Layer‑2 relevance: The surge underscores the growing importance of Ethereum L2s for large‑scale stablecoin deployment and for bridging traditional finance with emerging crypto‑native use cases.
As PayPal continues to leverage its fintech infrastructure in the crypto space, PYUSD’s growing presence on Arbitrum and its integration with AI‑centric lending platforms could set a precedent for more legacy finance firms seeking DeFi exposure. Stakeholders will be watching whether the early liquidity incentives translate into sustained demand for PYUSD as a settlement and collateral asset across the evolving layer‑2 landscape.
Source: https://thedefiant.io/news/tradfi-and-fintech/paypal-pyusd-supply-crosses-usd4-billion
