PayPal Executes First PYUSD Payment—How It Stacks Up Against Tether’s USDT

Key Takeaways

• PayPal’s successful business payment using PYUSD demonstrates the growing practicality and acceptance of stablecoins in commercial transactions.
• Fintech giants like Robinhood and Revolut are also exploring stablecoin issuance.
• However, displacing established stablecoins like USDT will be difficult due to their liquidity.

PayPal has completed its first business transaction  using its proprietary stablecoin, PYUSD. This milestone highlights the growing role of stablecoins in commercial transactions, moving beyond consumer use cases into enterprise solutions.

The Fintech company is likely to be joined by other major industry players, which could have significant implications for the traditional leaders in the stablecoin market.

First Stablecoin Business Transaction

PayPal has completed its inaugural business payment using its proprietary stablecoin, PYUSD . This marks a significant milestone in demonstrating the practical applications of digital currencies in commercial transactions.

On Sept. 23, PayPal paid an invoice to Ernst & Young LLP using PYUSD, leveraging SAP’s digital currency hub platform. This enables them to send and receive digital payments instantly and around the clock. While the specific invoice amount remains undisclosed, the transaction highlights the potential benefits of stablecoins in streamlining business processes.

Stablecoins like PYUSD are cryptocurrencies pegged to traditional currencies, ensuring stability. While consumer-focused applications often take center stage in discussions about stablecoins, this business payment showcases their broader utility in commercial settings.

Jose Fernandez da Ponte, PayPal’s senior vice president of blockchain, cryptocurrency, and digital currency, emphasized  the company’s collaboration with established industry partners to demonstrate the practical value of stablecoin-enabled business payments.

Who’s Joining PayPal?

According to a Bloomberg article, Fintech giants Robinhood and Revolut are exploring  the possibility of launching their stablecoins as Europe’s evolving regulatory landscape promises to provide greater clarity and potentially impact the market share of crypto-native companies. Both companies are actively considering entering the stablecoin market as the industry grows.

Historically, Tether’s USDT has dominated the stablecoin market. The issuer has capitalized on macroeconomic factors and other firms’ regulatory challenges, including banking crises and stricter oversight in the U.S.

USDT pegged to the U.S. dollar, has seen its market share increase by over 20% in the past two years. It accounts for more than 75% of the total stablecoin market. This growth has translated into substantial profits for Tether. The company reported  record-breaking earnings of $5.2 billion in the first half of 2024. Tether has also amassed a more significant stockpile of U.S. government bonds to support its reserves.

The success of Tether‘s business model, driven by USDT’s stability and strong reserves, may encourage other players to enter the stablecoin market.

Risks to Stablecoin Market

The rise of fintech companies may challenge to the dominance of major stablecoins like USDT in the digital asset space. With their innovative payment systems and wide consumer reach, fintech firms are increasingly exploring digital assets and stablecoin alternatives.

Fintechs have several advantages that could disrupt the stablecoin market. First, they often have large, established user bases and more seamless integration with traditional financial services. This makes it easier for consumers and businesses to use fintech-backed digital currencies.

Fintech companies are often more agile and responsive to regulatory developments. As regulators worldwide increase their scrutiny of stablecoins, particularly regarding transparency, reserves, and compliance with anti-money laundering laws, fintech companies may be better positioned to adapt to these changes.

However, despite potential risks, the biggest stablecoins, particularly USDT, have some strong defenses. USDT enjoys widespread liquidity, deep market penetration, and high usage across various cryptocurrency exchanges. It is also deeply integrated into the infrastructure of decentralized finance (DeFi), making it a key player in digital financial systems. These factors make it difficult for new entrants, including fintechs, to displace USDT immediately.

About the Author

Giuseppe Ciccomascolo

Giuseppe Ciccomascolo began his career as an investigative journalist in Italy, where he contributed to both local and national newspapers, focusing on various financial sectors. Upon relocating to London, he worked as an analyst for Fitch's CapitalStructure and later as a Senior Reporter for Alliance News. In 2017, Giuseppe transitioned to covering cryptocurrency-related news, producing documentaries and articles on Bitcoin and other emerging digital currencies. He also played a pivotal role in establishing the academy for a cryptocurrency exchange website. Crypto remained his primary area of interest throughout his tenure as a writer for ThirdFloor.

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