PayPal's PYUSD Stablecoin Tops $1 Billion Market Cap After Spark Partnership

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PayPal (NASDAQ:PYPL) has warmly embraced crypto by enabling purchases via crypto, offering digital wallets, and creating its own stablecoin. That stablecoin, PYUSD, is pegged to the dollar, and it recently exceeded a $1 billion market cap after a partnership with Spark.

The stablecoin’s market cap is up by more than 100% over the past year, but that doesn't mean early investors enjoyed a 100% return. It simply reflects the growing demand for stablecoins as people look for a way to tap into crypto's benefits without the volatility. PYUSD is currently the ninth largest stablecoin by market cap.

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What The Partnership Means

Spark announced the partnership in an X post, which got plenty of engagement. The firm offers stablecoin infrastructure and liquidity for issuers. PayPal can issue stablecoins more effectively and become a leader in the industry, while Spark benefits from further validating its business model and boosting demand for its stablecoin solutions.

PayPal also gets to be a frontrunner in decentralized finance, which is getting more established. Other fintech firms like Visa (NYSE:V) and Mastercard (NYSE:MA) have been partnering with several crypto firms to capitalize on this new type of currency.

Stablecoins can disrupt finance since they don't require middlemen. That results in more affordable transactions that let merchants bypass credit and debit card fees.

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How PayPal Benefits From Its Stablecoin

PayPal is already a top choice for consumers who want to buy products and services online, but stablecoins can help PayPal retain its lead and boost customer engagement. Winning over the next generation with top-tier stablecoin offerings can ensure that PayPal stays relevant and grows in the years to come.

Stablecoins are also more efficient and cost-effective. Merchants may opt to accept payments via PYUSD and similar stablecoins instead of contending with high transaction fees from traditional finance.

Getting into stablecoins now lets PayPal ride the next big financial trend instead of getting swallowed by it. For instance, Kodak was the leader in photography for many years, but its reluctance to adapt in a world filled with smartphones led to its demise. PayPal's push into stablecoins helps it avoid that fate.

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How PayPal Makes Money From Stablecoins

Issuing a stablecoin can boost engagement on the platform and make PayPal a more competitive payment option, but the company still makes money directly from its stablecoins.

The company backs each PYUSD with $1 to mimic the dollar, but PayPal also puts that money into short-term U.S. Treasuries. This arbitrage opportunity can be quite lucrative for PayPal as stablecoin demand grows, especially if interest rates go higher. It's an extra way for PayPal to earn money, and the possibility of a reward system for PYUSD can further incentivize people to put their money into PYUSD.

PYUSD and other stablecoins can benefit many individuals, but it's also aiding the federal government. The business model around stablecoins involves stablecoin issuers buying up U.S. Treasuries, which lowers T-bill interest rates, which can end up lowering federal debt, according to the American Bankers Association Bank Journal.

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This article PayPal's PYUSD Stablecoin Tops $1 Billion Market Cap After Spark Partnership originally appeared on Benzinga.com

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