Author|jk
Recently, payments giant PayPal announced its second-quarter earnings: revenue reached $8.68 billion, exceeding market expectations, with total payment volume hitting $486.4 billion, a year-on-year increase of 10%.
Furthermore, PayPal positioned PYUSD (PayPal USD) as a "major enabler/key driver" for the PayPal World platform and emphasized its core role as a "commerce-first" stablecoin targeting mainstream consumer and merchant scenarios.
In the fiercely competitive stablecoin market, PYUSD has consistently performed lukewarmly. What are its future development prospects? And can PayPal truly withstand this cost?
Q2 Earnings: Where Does PYUSD Stand?
PayPal's revenue this quarter was $8.68 billion, up about 5% year-on-year, exceeding analysts' expectations of $8.47 billion. Adjusted earnings per share were $1.38, also better than the market expectation of $1.28, while GAAP EPS was $1.26, slightly below expectations. Total payment volume reached $486.4 billion, a 10% year-on-year increase, representing a 9% growth on a currency-neutral basis. The full-year adjusted EPS guidance was raised to approximately $5.38.
Looking at these core metrics alone, this is a slightly better-than-expected earnings report.
The stock price has been growing over the past month. Source: Google
But the other side of the profitability story is different. The GAAP operating margin fell from 18.1% last year to 16.4%. The company attributed an $81 million net loss to strategic investments and crypto assets held for investment purposes, excluding it from non-GAAP results. In other words, crypto assets have already put some pressure on PayPal's reported profits. However, it's still difficult to conclude whether this loss is merely a temporary mark-to-market decline due to market downturns or the company actively absorbing costs to promote business expansion.
Simultaneously, PayPal established a new "Payment Services & Crypto" department this quarter, grouping PYUSD with merchant processing operations under the same line. CEO Enrique Lores stated in the earnings call that the company plans to launch more merchant products powered by PYUSD and AI agentic payments. PYUSD has been integrated into PayPal's core merchant payment system, no longer a relatively independent innovation project. Compared to management's verbal emphasis on its "strategic value," this organizational restructuring better reflects PayPal's actual positioning of PYUSD.
However, the company has yet to separately disclose PYUSD's specific contribution to revenue, merchant retention, or transaction margins. Investors can only infer the extent to which this stablecoin drives performance from aggregate data and management rhetoric, making this the most critical information gap to track in the coming quarters.
The Strategic Significance of PYUSD for PayPal: The Expanding Narrative vs. The Contracting Supply
Since its launch in August 2023, PYUSD has undergone a cycle of expansion and contraction with the crypto market's bull and bear phases.
In March of this year, the company expanded its coverage to 70 markets, and its supply once surged to around $4.2 billion, with a year-on-year growth rate nearing 680% at one point, making it the fastest-growing among major stablecoins. To date, PYUSD has been deployed on nine public chains: Ethereum, Solana, Arbitrum, Stellar, Avalanche, Aptos, Sei, Tron, and Abstract. In February, PayPal set Solana as the default payment processing network.
On July 9th, PYUSD achieved native integration via Polygon's Open Money Stack, incorporating wallets, fiat on-ramps, compliance tools, and on-chain settlement capabilities, clearly targeting enterprise cross-border payment scenarios. The PYUSDx framework, launched through a partnership with MoonPay, allows developers to issue application-specific stablecoins based on PYUSD reserves, attempting to make PYUSD a foundational layer for others to build upon rather than just an end-user product. Kraken recently announced support for PYUSD deposits and withdrawals on the Stellar network, further expanding its presence on exchanges.
These actions together paint the story PayPal wants to tell: PYUSD is evolving from a balance tool for PayPal users into a payment infrastructure layer that can be directly utilized by third-party wallets, exchanges, and developers.
In other words, in the future, when businesses intend to collect global payments, they can directly use or develop payment tools based on PYUSD to receive fees worldwide. This would eliminate the need for lengthy customs declarations and foreign exchange processes associated with fiat currencies and the limitation of serving only crypto-related users like other stablecoins. This is a dream scenario for all those involved in foreign trade: all funds arrive in real-time, fees are lower compared to before, and the paying user hardly notices. The payer's fiat currency is converted to PYUSD in the backend and then converted back to another fiat currency for the recipient, with the entire process being swift and convenient.
This is also why PayPal mentioned it alongside AI in its earnings report. The company stated it is using machine learning to optimize fraud detection, reduce processing costs, and support automatic conversions between fiat and stablecoins based on exchange rates and user behavior.
However, on-chain data tells a less optimistic story: After peaking around $4.2 billion in March, PYUSD's supply fell by approximately 31% by the end of Q2, dropping to around $2.7 billion. This is the first significant decline since issuance, primarily due to reduced incentives and capital rotation into other assets. As of early August, the circulating supply of PYUSD is about 2.7 billion tokens, with a market cap of approximately $2.72 billion, ranking around 32nd on CoinGecko's stablecoin list.
PYUSD's scale is declining. Source: Coingecko
This means that while the earnings narrative emphasizes the breadth of coverage and chain integrations, the actual circulating supply contracted by nearly one-third during the same period. The expanding narrative and the contracting supply coexist, reflecting a harsh reality: market share and regulatory uniqueness (PYUSD is the first dollar stablecoin issued by the federally regulated entity Paxos, a status further solidified when Paxos became OCC-regulated by the end of 2025) do not necessarily translate into sustained demand for holding the token. When incentives were withdrawn, the initial volume did not convert into stable usage, and the competition with USDC still has a long way to go. If subsidies prove ineffective, as was often the case in the early days of the crypto industry, then PYUSD's current market share cannot continue to expand.
PYUSD vs. Open USD: Why Was PYUSD Earlier But Has Less Influence?
If PYUSD represents the single-issuer model stablecoin, then Open USD, which emerged on June 30th, represents a structurally different path. This timing was less than a month before PayPal's Q2 earnings release.
Open USD is operated by a newly established independent company, Open Standard, with its founding CEO being Zach Abrams, co-founder of Stripe's Bridge. It boasts over 140 signing partners, covering almost the entire payment and financial industry's top players: payment networks like Visa and Mastercard; payment infrastructure like Stripe and Shopify; asset management and banking like BlackRock, BNY, and Standard Chartered; tech platforms like Google and IBM; and crypto-native players like Coinbase, Solana, and Aave. The project is expected to launch in the second half of 2026 and has not officially issued tokens yet.
The most fundamental difference between Open USD and PYUSD lies in the economic structure and governance model: simply put, only PayPal profits from PYUSD, while everyone benefits from Open USD.
PYUSD follows the classic model used by USDT and USDC, where Paxos, as the single issuer, custodies reserve assets and earns floating income, while PayPal, as the brand owner, drives product roadmap and market strategy. Open USD, in contrast, makes minting and redemption completely free for partners with no caps. The revenue generated from reserve assets, after deducting minimal management fees, is distributed back to participating partner institutions instead of being retained solely by a single issuer. Governance rights are also given to a board composed of partner institutions rather than controlled by one company. In industry commentary, this is closer to the governance logic of interbank clearing networks like ACH or SWIFT, not today's USDC or USDT.
A detail easily overlooked but crucial for understanding PayPal's position is that PayPal itself is one of the over 140 signatories of Open USD, even as PYUSD continues to exist as an independently issued asset. This means PayPal has not tied itself exclusively to the PYUSD ship but has positioned itself in both stablecoin models, continuing to invest in PYUSD as a proprietary brand asset while securing a seat in the possible future industry landscape through the Open USD partnership.
In contrast, Circle and Tether are not on Open USD's partner list. Circle's stock price fell over 16% on the day the news broke. Circle CEO Jeremy Allaire subsequently responded publicly, emphasizing USDC's network effects and distribution depth, citing Paxos's consortium-model stablecoin USDG as a precedent, noting that its supply has only reached about $3 billion after over two years since launch, far below initial optimistic expectations.
Looking at these three together, the competitive landscape facing PayPal is becoming more complex. PYUSD, with its first-mover advantage, has established some brand recognition and multi-chain deployment foundation, but its absolute size is still only about one-twentieth of USDC's, and it recently showed signs of supply contraction. If successfully launched, the real threat of Open USD lies not in poaching PYUSD's existing holders but in its attempt to redefine the entire industry's distribution economics. If top-tier distributors like Stripe, Visa, and Mastercard can share reserve income through a consortium model, the single-issuer model stablecoins could face complete replacement.
PayPal's choice to hedge its bets is, to some extent, an acknowledgment of this uncertainty. Rather than betting on one model's victory, it's better to retain a seat in both. For PYUSD, what truly needs to be proven in the coming quarters is not how many markets or public chains it covers, but whether it can convert the established distribution network into sustained, non-subsidy-dependent demand after incentives are gone. If it ultimately cannot achieve this, then $2.7 billion might be PYUSD's current peak.
