Tether vs USDC or PYUSD? PayPal USD and popular stablecoins compared

PYUSD has garnered significant interest from both the cryptocurrency community and PayPal's user base, who are eager to explore the currency's potential to compete with the two leading US dollar-backed cryptocurrencies, USDT and USDC.

A construction made of dollars and bricks
At press time, PYUSD ranked 513th in terms of daily trading volume among the over 9,000 cryptocurrencies listed on CoinMarketCap

The August 7 launch of PayPal’s cryptocurrency, the PayPal USD (PYUSD) stablecoin, has sparked a lot of controversy in the Web3 community.

On the one hand, the digital asset issued by the fintech giant specializing in digital payments for fiat currency has attracted a lot of interest, especially due to the fact that it is the first company in the industry to launch its own stablecoin. On the other hand, many PayPal customers are concerned about the company's history of suppressing their financial freedom, which does not align with the goal of decentralization. In addition, PayPal is facing severe competition from the two major USD stablecoins, Tether (USDT) and USD Coin (USDC).

Read also: PayPal Stablecoin Explained: What PYUSD Means For Crypto?

Let's compare PYUSD with its rivals to better understand the PYUSD's position on the modern digital currency market.

What Is PYUSD?

The PayPal USD, currently issued by Paxos Trust Company, is an Ethereum-based ERC-20 token that makes this cryptocurrency compatible with a variety of Ethereum wallets and supports its integration into the DeFi ecosystem.

The PYUSD stablecoin enjoys particular credibility as it is regulated by the New York State Department of Financial Services.

PYUSD use cases include financial transactions between Ethereum wallets and the PayPal ecosystem such as online purchases and peer-to-peer payments, as well as conversion of other PayPal's supported cryptocurrencies such as Bitcoin, Ether, Litecoin, and Bitcoin Cash. At press time, it was not possible for customers to purchase USDT with PayPal.

PYUSD Consumer Fees
Source: PayPal

PYUSD fees - how much will you pay to transfer PayPal USD?

The PayPal network claims that it does not charge fees "for holding cryptocurrency in your account, transferring cryptocurrency to other PayPal cryptocurrency accounts." "For PayPal USD (PYUSD) only, there are no fees to buy or sell. Fees apply when you use the convert feature to buy other cryptocurrencies," the official website states.

As you can see, you can receive PYUSD from external wallets without paying fees and you do not have to pay fees if you want to purchase PayPal USD. However, the service will charge you if you buy or sell other cryptocurrency or send it to external services.

The amount of fees depends on the USD value of the converted cryptocurrency and ranges from 0.49 USD for the conversion value below $10 to 1.45% of the converted value for the amount of cryptocurrency worth over $1000. The fees apply to different types of business and person to person payments. Thus, while PayPal earns nothing on the use of its stablecoin, including PYUSD fund purchases, PayPal's cryptocurrency services are generally paid for.

PYUSD Price and Volume

At press time, the PYUSD circulating supply and total supply were the same and amounted to 44,376,440 tokens.

The PYUSD price was $1, as is intended for a US dollar-pegged stablecoin price. The PYUSD's market cap was $44,410,683, making it the 378th cryptocurrency among 9,274 active tokens listed on crypto data aggregator CoinMarket Cap at press time.

Meanwhile, the PYUSD trading volume experienced a significant decline. In just 24 hours, it fell from $1,489,742 to $1,360,981, which meant it dropped from 489th position on the CoinMarketCap list to the 513th.

The aggregator mentioned Kraken as the top trading platform for the PYUSD/USD and PYUSD/EUR pairs, Uniswap v3 for the PYUSD/WETH and PYUSD/USDC pairs, and Gate.io for trading PYUSD/USDT. Note that you cannot currently buy PYUSD on the Binance crypto exchange.

Read also: Fake PayPal USD Tokens Crop Up On Decentralized Exchanges

According to the latest data from CoinMarketCap, PYUSD/USDT is the most popular trading pair involving the PayPal stablecoin.

PYUSD stability and the dollar deposits of the PayPal stablecoin

It is promised that the PayPal USD reserve assets are sufficient to support this cryptocurrency. PayPal claims that the PYUSD is "100% backed by US dollar deposits, short-term US Treasuries, and similar cash equivalents. PayPal USD is redeemable 1:1 for U.S. dollars."

To prove the stability of its stablecoin, PayPal promises to publish a transparent PayPal USD Reserve Report every month. This public monthly reserve report will cover the balance of the PYUSD dollar deposits and PayPal balance accounts starting from September 2023 and "outline the instruments composing the reserves."

According to PayPal, Paxos plans to go through an attestation of the value of PYUSD reserves provided by an independent accounting firm. The attestation is to be conducted "in accordance with attestation standards established by the American Institute of Certified Public Accountants (AICPA)." The results of the PYUSD attestation will also be disclosed to the public.

What Is USDT?

The Tether meaning for the cryptocurrency industry is significant as USDT, launched in 2014 by Hong Kong-based Tether Limited, became the world’s first stablecoin backed by a fiat currency. However, the crypto community has questioned Tether's claims to be 1-to-1 backed by the US dollar since the currency's inception.

According to Tether, the amount of its coins is equal to the amount of fiat money deposited by Tether users after paying the fees. At the time of publication, Tron and Ethereum were the main blockchains used for issuing Tether. The stablecoin is also available on Solana, Omni, Avalanche, Tezos, Kava, EOS, Liquid, Algorand, Near, SLP, Polygon, Polkadot Asset Hub, and Kusama Asset Hub, which increases its adoption for fintech projects by external developers.

Tether is used to enable direct flows of finances and helps users conduct international payments. The team behind Tether explains that the cryptocurrency is able to transform payments due to its "exceptional liquidity on tier one exchanges, giving traders the ability to take advantage of arbitrage opportunities in the fastest possible time." At the same time, Tether claims to be a stable instrument for merchants and the digital token ecosystem in general.

USDT fees

Transaction fees for Tether vary depending on the blockchain used to issue the stablecoin.

There are also differences in the amount of withdrawal fees for different crypto exchanges. For example, according to the Coinmarketfees platform, the current Kucoin withdrawal fees for USDT on Solana are $0.7996523, while the fee on Near is $0.9995653.

USDT volume

According to Tether's official report, total assets as of September 4 amounted to $86,203,992,557.65. The latest data from CoinMarketCap shows that Tether's circulating supply was 82,907,915,063 at press time, while its total supply was 85,437,198,727.

The stablecoin currently enjoys a market cap of $82,872,937,577, which makes it the third largest cryptocurrency by this criterion. Meanwhile, Tether was the number one cryptocurrency at the time of publication based on the 24-hour trading volume, which reached $17,854,399,328.

Tether daily balance report
Source: Tether

USDT stability

Tether has been accused of failing to submit audits since 2017 when it planned to make its reserves transparent. Tether is mainly assessed through attestations, which provide only a snapshot of a balance sheet for a given day, unlike audits that result in a complete review of a company's finances during a given period.

The official Tether website states that all tokens "are pegged at 1-to-1 with a matching fiat currency and are backed 100% by Tether’s reserves."

On its website, Tether has a "Transparency Page," where it discloses its current balances on various blockchains as well as the total amount of assets. This information is updated on a daily basis.

Read also: New York Supreme Court orders Tether to reveal reserve records

As the website states, Tether Holdings Limited also issues quarterly assurance opinions provided by BDO Italia, a part of the global professional services network Binder Dijker Otte (BDO) headquartered in Belgium.

Tether claims that these opinions, as well as its own reports, "clearly and unambiguously show that all Tether tokens are fully backed by reserves and provide a comprehensive breakdown of those reserves."

Tether has been publishing its BDO reports since June 2022. Prior to that, the company released two reports from MHA Cayman, in 2021 and 2022 respectively. The crypto community had certain concerns about this accounting firm, as it belonged to MHA Maclntyre Hudson, which was under investigation in the UK.

The website also promises that "Tether Holdings Limited and its shareholders allocate capital in reserves which are reviewed on a quarterly basis. This liquidity cushion is above and beyond the total market capitalization of Tether tokens (USD, EUR, CNH & MXN) to provide further stability to the Tether ecosystem and assurance to our users."

In addition, you can find the breakdown of reserves on Tether’s website.

What Is USDC?

USDC, a stablecoin pegged to the US dollar launched in 2014, is managed by the Centre consortium. It was founded by Circle, a global FinTech company. Some of Centre's notable members include representatives from Coinbase and Bitmain, a Bitcoin mining company.

USD Coin is issued as an Ethereum ERC-20 token but is also accessible on several other blockchains, including Tron, Polygon, Algorand, Solana, Avalanche, Stellar and Hedera’s hashgraph, a distributed ledger technology used as an alternative to blockchain networks.

According to Circle, its stablecoin, along with another Circle’s digital currency, Euro Coin (EUROC), "empower a network of businesses and builders around the world to move money in ways never thought possible," primarily through its 24/7 accessibility across different countries and ability to facilitate fast transfers of funds that "can take seconds to complete."

Furthermore, USDC aims to reduce transaction fees to "a fraction of a cent."

Circle also offers "an uber-money API that is global, open-source, interoperable, and free to use" to developers who can incorporate USDC into their financial products.

USDC fees

Similarly to Tether, USDC is issued on multiple blockchains and the transaction fees for this cryptocurrency are determined by the fees of a particular network.

The cost of depositing and withdrawing USDC on cryptocurrency exchange platforms depends on the fees of the platform itself and the network used to issue USD Coin. For instance, Algorand USDC from Huobi has no withdrawal fees at all, while ERC20 USDC has a withdrawal fee of $5.3970119 on the same exchange platform.

USDC Volume

USD Coin has a very high position among other cryptocurrencies. According to CoinMarketCap, it is the fourth largest cryptocurrency by 24-hour trading volume and the sixth cryptocurrency by market capitalization.

The most popular trading pair is USDC/USDT, which is especially popular on Binance. Other leading trading pairs that include this stablecoin are WMATIC/USDC, USDC/USD, USDC/EUR, USDC/WETH, BTC/USDC, and ETH /USDC.

At the time of publication, USDC's 24-hour trading volume was $2,521,690,499, while its market cap was $26,036,668,467. This puts USDC in second place after Tether.

USDC Reserve Report
Source: Circle

USDC stability

Circle claims that USDC is "100% backed by highly liquid cash and cash-equivalent assets," while its reserves "are held in the management and custody of leading US financial institutions, including BlackRock and BNY Mellon."

On its official website, Circle publishes monthly attestations, "which provide assurance that the amount of USDC reserves is greater than or equal to the amount in circulation each month, according to attestation standards set out by the American Institute of Certified Public Accountants (AICPA)."

The Circle's reports have been issued since October 2018, beginning with Grant Thornton's Independent Accountant Report.

The most recent report was made by Deloitte on August 30.

"In our opinion, management’s assertion that the Fair Value of Assets Held in the USDC Reserve is equal to or greater than USDC in Circulation as of the Report Dates in accordance with the criteria defined in the accompanying USDC Reserve Report, is fairly stated, in all material respects," the report from the leading professional services network states.

Read also: Coinbase Adds to Its Revenue Streams by Acquiring a Strategic Stake in USDC

According to the report, USDC in circulation on July 31, 2023, amounted to 26,407,355,247, while the fair value of assets held in the USDC reserve was $26,462,068,123.

Despite the apparent transparency, some sources claim Circle conducts "attestations" rather than "audits."

A curious fact is that last year Circle filed a complaint to the New York State Department of Financial Services alleging that Binance, Coinbase's rival, mismanaged hundreds of millions of dollars of the reserves that were supposed to secure Binance’s tokens.

PYUSD crypto potential

Despite the history of Tether violation of its own promises to conduct regular audits of its treasuries and similar cash used to bake its stablecoin digital assets, it enjoys the greatest popularity among other cryptocurrencies backed by the US dollar. This is partially the result of Tether's digital payment revolution, as USDT was the first cryptocurrency to be pegged to a fiat currency.

While the crypto world remains skeptical about Tether's backing reserves, this cryptocurrency has held the top position as the number one stablecoin for a considerable time, and competing with it may not be easy.PayPal’s stablecoin is still too new to judge its success, but it is already obvious that some of the crypto users have a certain distrust towards the project, mainly due to the financial censorship PayPal has imposed on its customers in the past.

The limitations in stablecoin adoption are also caused by the fact that it is not listed on Binance which is currently one of the main cryptocurrency trading platforms. However, this might change soon, especially after PYUSD was listed on Coinbase.

It is also worth noting that for PYUSD, consumer and merchant comprehension is quite high due to the familiarity of the PayPal platform. At the same time, it may also happen that this US dollar denominated stablecoin will be adopted mostly by existing PayPal customers, unlike digitally native Web3 cryptocurrencies like Tether and USDC.

The safest stablecoin

It is not easy to name the safest stablecoin, even among the leading digital currencies pegged to the Central Bank digital currencies. According to BitPay, a Bitcoin payment service provider, there were nearly 200 stablecoins in 2022, but not all of them managed to seamlessly connect fiat money to cryptocurrencies, meet regulatory standards, or deal with the exploits. These and many other factors eventually make many projects collapse.

Issuing successful stablecoin digital currencies requires reserve funds. It is not uncommon for stablecoin issuers to claim that their currencies are 100% backed by fiat reserves, but not all of these companies are scrupulous about verifying promised reserves and sharing the results with crypto investors and traders.

So far, USD Coin has a better reputation than Tether, whose reserves have always been the subject of controversy. Nevertheless, scrutinizing USDC's reserves may also lead to doubts about the trustworthiness of the claims about the stablecoin’s reserves.

In the meantime, Paxos Trust Company is also planning to make PYUSD associated with the PayPal platform transparent, but only time will tell if the PYUSD issuer will manage to deliver the promised transparency or not.