PayPal (NASDAQ: PYPL) is making a strategic move by adding its stablecoin to the Solana blockchain, a network known for its association with meme coins.
What Happened: Initially launched on the Ethereum blockchain in August, PYUSD was subsequently added to PayPal's Venmo peer-to-peer payments service in September.
The decision to incorporate Solana's blockchain was influenced by its high transaction speed and low fees, according to Jose Fernandez da Ponte, PayPal's senior vice president of blockchain, cryptocurrency, and digital currency, Bloomberg reported.
Solana's network processes approximately 1,423 transactions per second (tps), significantly outpacing Ethereum's 12 to 15 tps.
Fernandez da Ponte emphasized the necessity for high transaction speeds in the retail sector, noting, "If you are in the retail space, you need to be able to sustain at least 1,000 transactions per second."
Solana has seen a surge in trading volume, hitting the highest levels in over two years, driven by meme coins like Slerf Book of Meme, Snap, and Dogwifhat.
Despite Solana's superior speed, Ethereum was initially chosen for PYUSD due to its widespread customer familiarity and capability to handle high-value transactions.
Currently, PYUSD, issued by Paxos Trust Company, boasts a market capitalization of nearly $400 million. By comparison, Tether, the largest stablecoin globally, has a market cap exceeding $111 billion.
Fernandez da Ponte revealed that while PYUSD is primarily active on crypto exchanges and decentralized finance platforms, PayPal aims to expand its usage to retail payments and emerging markets in Latin America, Southeast Asia and Africa.
Notably, PayPal's Xoom service allows customers to send funds abroad using PYUSD-converted dollars.
Why It Matters: However, PayPal's journey with stablecoins hasn't been entirely smooth.
The company paused its stablecoin initiatives in February 2023 amid regulatory scrutiny and received a subpoena from the U.S. Securities and Exchange Commission in November.
Fernandez da Ponte said, "They requested some information. We are collaborating with them and providing them with that information."
Despite past technical challenges and network outages, PayPal remains confident in Solana's stability. Fernandez da Ponte assured that users can switch to Ethereum if Solana experiences any disruptions and indicated that PayPal plans to add PYUSD to more blockchains in the future.
"The intention of the stablecoin from the very beginning has always been to be multi-chain, so we'll continue to evaluate others," he said.
Sheraz Shere, general manager of payments at the Solana Foundation, noted that improvements have been made to address Solana's technical issues, with the most recent outage in February lasting five hours.
Shere highlighted PayPal's stablecoin initiative as a sign of traditional payment companies' increasing interest in digital assets.
He also referenced Stripe Inc.'s recent decision to enable stablecoin payments for merchants, stating, "It really does feel like the fintechs are starting to creep in and I think stablecoins are the product-market fit that a lot of people in blockchain have been waiting for."