PayPal’s cryptocurrency enters the top 100 of the most valuable cryptocurrencies. PYUSD has increased its market capitalization by 1400% since its launch.

• PYUSD’s market cap is now over $600 million.
• With its expansion to the Solana network, PYUSD captured the attention of new users.

PYUSD, the digital currency created by the PayPal payments platform, has today entered the list of the 100 cryptoassets with the largest market capitalization. The cryptoasset achieved this milestone by reaching a new all-time high in capitalization today of $630 million (USD). The number implies a 1,400% increase since its launch almost a year ago, in August 2023.

PYUSD currently ranks as the 100th largest cryptoasset. Thus, it gains power among the stablecoins in the market, strengthening itself as the sixth largest capitalization, as shown in the table.

PYUSD is a stablecoin, so its price is always $1. The increase in market cap implies that there has been a vast token issuance.

Growing adoption of PYUSD in Solana

The increase in capitalization has come amid an increase in its use on the lending platform Kamino Finance, which offers rewards by depositing the PayPal stablecoin. As communicated by the app, it has experienced a weekly growth in returns from 490,000 PYUSD to 760,000 PYUSD. Kamino Finance clarified in the announcement that rewards go up with inflows, so they will continue to rise if usage grows. The announcement arrived two months after PYUSD went live in Solana, home of the lending platform. At the moment, PYUSD’s supply in Solana is USD 260 million. With such traction, 42% of the stablecoin supply is now on this network, as the following graph exhibits. Meanwhile, as CryptoNews reported, the rest is on Ethereum, where it continues to lose dominance.

Adding to this, the financial app GCrypto provides the option to make PYUSD transactions via Solana. The functionality comes a week after the cryptoasset exchange Crypto.com did the same. Thus, the stablecoin is gaining capitalization as new initiatives enable its adoption via Solana.

Stablecoins: a jump to USD 164 million

Amid a market revitalization that has brought the capitalization of stablecoins to USD 164 million, organizations such as the Bank for International Settlements (BIS) are looking at how to monitor the sector. In an announcement made this July 31, the BIS has launched a project that allows stablecoin reserves to be monitored in real-time.

The idea is to exert more control over the cryptocurrency sector, putting special interest in assets backing stablecoins, which remain a controversial sector in the industry. To this end, they are working on the development of Pyxtrial, “a prototype analytics channel that facilitates data collection, storage, and analysis.” The goal of this project is to provide supervisors and regulators in the cryptocurrency sector with information about stablecoin liabilities and their backing assets.

BIS new tool: Pyxtrial

Adopting Pyxtrial can help supervisors receive more frequent and fully automated reports. This improves the efficiency and responsiveness of the monitoring process, helping supervisors to respond more quickly to potential risks.
BIS report

The BIS adds that with Pyxtrial they seek to verify that the assets of the issuing companies exceed the liabilities and that the amount of backing is greater than the issuance of coins. They point out that the prototype is designed so that its technical components (APIs, integration layer, data model, data storage solution, and control panel) can be reused. However, the tool is still in the testing phase before being deployed in the market and will require staff training.

The unveiling of the new BIS tool comes when regulators in several countries continue to raise concerns about the validity of the reserves that stablecoin issuers claim back their holdings. It has been one of the controversies that has dogged Tether, the issuer of the market’s dominant stablecoin. Authorities accused the company of not being transparent about backing the dollar-anchored currency.

In 2021, Tether settled with New York legal authorities, paying a fine of USD 18.5 million and the obligation to file quarterly reports reflecting its financial operations. This after being sued by the authorities in that state. According to its website, most are cash reserves, cash equivalents, and other short-term deposits. In total, these three assets represent 85% of the company’s reserves. BIS’s plan, with its new tool, is to give the authorities the possibility of auditing the information provided by the issuing companies.

Growth in the stablecoin market

Pyxtrial’s presentation comes in an environment characterized by significant growth in stablecoin trading, following the decline it experienced with the collapse of Terra in 2022. According to data source DefiLlama, the capitalization of stablecoins had remained sideways at around $160 billion.

“The increase in stablecoin supply indicates that money is being deposited into blockchain ecosystems to generate economic activity, either through outright purchases or yield-generating strategies that could improve liquidity,” says the firm Wintermute. Such a development is possibly raising alarm bells for regulators, who have always expressed fears that stablecoins will destabilize the global financial system. As a sign of this fear, not only tools such as those of the BIS emerge but also laws such as MiCA, the new regulation implemented in the European Union that seeks to limit the circulation of this type of currency in the region.