PayPal stablecoin registers 200% growth amid rival Tether's regulatory pressure

PayPal USD (PYUSD), the stablecoin launched by PayPal, has recorded 216% growth in under 90 days, with new data from DeFiLlama showing a sharp increase in the stablecoin’s circulation and on-chain usage.

The expansion comes at a moment when sentiment around stablecoin issuers is shifting, especially as Tether faces renewed regulatory scrutiny.

PayPal USD surges to sixth-largest stablecoin

As of September 2025, PayPal USD had a market capitalization of $1.28 billion. In less than three months, increased payment activity and broader blockchain availability pushed its market cap to $3.8 billion, more than tripling the supply in circulation.

A major driver of the growth is PayPal’s recent expansion to Solana and Arbitrum via LayerZero integration, enabling cross-chain transfers and improving liquidity across decentralized finance platforms. The increased accessibility has coincided with a rise in Web3 users settling payments or routing trades using PYUSD.

PayPal's PYUSD has grown from $1.2B market cap in September to over $3.8B today.

Track over 300 stablecoins on DefiLlama. pic.twitter.com/leBEixDhQ6

— DefiLlama.com (@DefiLlama) December 3, 2025

Launched on Aug. 7, 2023, PayPal USD is a fully backed, Ethereum-based stablecoin issued by Paxos. At the time, PayPal became the first major U.S. financial firm to introduce a dollar-backed digital asset.

A stablecoin is a cryptocurrency designed to keep its value pegged to a stable asset,  usually the U.S. dollar, so it doesn’t swing in price like Bitcoin or other tokens.

It is meant to behave like a digital dollar, offering the speed of crypto with the stability of fiat.

PYUSD’s rapid climb comes shortly after PayPal introduced a new peer-to-peer feature called “links,” allowing users to send funds through a one-time, sharable link.

The tool is integrated into Venmo and other PayPal services, making it easier to move stablecoins across platforms or in conversations.

The stablecoin’s presence on major exchanges such as KuCoin, combined with integration in Venmo’s P2P system, has contributed to its rising usage within both retail payment flows and crypto-focused transactions.

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Tether faces pressure over transparency

PYUSD’s momentum contrasts with challenges facing Tether (USDT), the largest stablecoin by market cap. 

S&P Global Ratings downgraded Tether to “5 (weak)” on its stablecoin risk scale on Nov. 26, citing limited transparency and rising exposure to higher-risk assets, including Bitcoin (BTC), gold, corporate debt, and secured loans.

BitMEX co-founder Arthur Hayes also criticized Tether’s reserve composition, arguing the firm is “in the early innings of running a massive interest rate trade.” 

Hayes pointed to Tether’s latest attestation and said a potential 30% drawdown in its Bitcoin and gold holdings could, in his view, “wipe out their equity,” creating theoretical solvency concerns if rates fall and asset prices decline.

PayPal USD is now the sixth-largest stablecoin by market capitalization of $3.82 billion, while USDT by Tether currently has a market cap of $184.72 billion, as per CoinMarketCap data.

Related: PayPal steps into the future with bold stablecoin innovation