After Paxos’s failure in BUSD due to regulation and the recent approval of Solana’s stablecoin business, can its stablecoin USDP join the bandwagon of Solana’s popularity?
Background:
Replacing USDT! Arthur Hayes: USDe will become the “largest US dollar stablecoin”; Ethena mainnet will be launched in January next year
Table of Contents:
Paxos Market Share Declines, Challenging Aura Fades
Growing Use Cases for Solana Stablecoin, Can It Boost Paxos?
How Active are the Stablecoin Use Cases on Solana?
Paxos was once known for its BUSD business. In February 2023, BUSD was suddenly regulated by NYDFS. After BUSD was halted due to regulation, Paxos gradually became weak in the stablecoin competition. Will the approval of Solana’s business bring new growth opportunities for Paxos and disrupt the stablecoin market, which has a relatively stable structure?
Let’s look at Paxos’s dramatic development over the course of the cycle.
Historical data shows that during the bear market in 2022, the market capitalization of USDT and USDC, the “duopoly,” declined slowly. Meanwhile, Paxos’s BUSD continued to rise slowly and reached a historical high of over $23 billion at one point.
However, after the regulatory sanctions, Paxos lost BUSD, and USDP has not been able to make much impact in the stablecoin market.
According to DeFiLlama data, the stablecoin market is still dominated by two major players. Although BUSD briefly became the third-largest stablecoin, the market share of Paxos’s main product, USDP, remains relatively low.
According to DeFiLlama’s data, the total market capitalization of stablecoins is about $130.7 billion. USDT and USDC together occupy 88% of the stablecoin market share.
Although USDP is the ninth-largest stablecoin, it cannot compete with the long-standing duopoly in the stablecoin market in terms of market share.
Currently, the total market capitalization of USDP is only $370 million. Compared to the peak of BUSD, it is equivalent to only 1.6% of BUSD.
This data seems somewhat unfavorable for the former third player in the market. However, expanding the business suite to the Solana ecosystem may bring new vitality to Paxos.
In recent days, the continuous surge of SOL tokens has brought the Solana ecosystem back to the center of the market. According to DeFiLlama data, the total value locked (TVL) in the Solana ecosystem has increased nearly five times this year.
With Solana’s rapid progress, although we do not yet know where Solana will go in the future, both the community and the market have high expectations for it.
In the future, compliance seems to be one of Solana’s potential narratives.
Currently, SOL has become the fourth-largest cryptocurrency in terms of market capitalization. If we exclude USDT from the ranking, SOL is the third-largest cryptocurrency after BTC and ETH. If Solana continues to grow and become the next generation of crypto giants, stablecoins will still be an indispensable business landscape and use case within this ecosystem.
Currently, the stablecoin market still faces many regulatory uncertainties. Although USDT and USDC have maintained stability in the long term, USDP still has unique compliance features.
It is worth noting that although BUSD briefly gained a decent market share in the crypto market, the BUSD deployed on the BNB Chain, well-known to the public, and the ETH mainnet BUSD with regulatory approval are not the same. BUSD is only deployed on the Ethereum network by Paxos, and other networks are brought in through third parties. Previously, Odaily Star Daily had provided a detailed interpretation of Paxos and BUSD in an old article.
As investors, it is difficult for us to assert which stablecoin brand is safer and more reliable. However, judging solely from the “paper documents,” USDP is undoubtedly one of the top stablecoin brands with better compliance.
The expansion of Paxos’s business beyond the ETH mainnet for the first time, thanks to regulation approval, is not only a prospect for the potential of USDP but also to some extent reflects the regulatory attitude towards Solana. A reasonable speculation is that if Solana continues to maintain its “compliance,” “compliant stablecoins” will be an unavoidable puzzle piece in its ecosystem.
The expansion of Paxos’s business is seen as a milestone for the company. Looking ahead, this move may trigger the next stablecoin war and have a profound impact on the entire stablecoin market.
Currently, the stablecoin market on Solana is quite active.
According to data from institutional crypto data platform Artemis, since early December, the daily stablecoin transfer volume on Solana has increased by 600%, reaching $16.6 billion, making it one of the main blockchain networks for stablecoin use cases.
Stablecoin Transfer Volume on Solana Network
Comparison of Stablecoin Transfers on Different Networks
From the level of activity, Solana is undoubtedly one of the major stablecoin use cases. With the compliance of USDP, is Solana willing to see it as a highly connected stablecoin within its ecosystem?
Paxos has always been known for its “compliance” and has issued the PayPal stablecoin PYUSD. Raj Gokal, co-founder of Solana, publicly stated about Paxos’s business expansion: “Paxos has decided to introduce stablecoin issuance to the Solana blockchain, which will demonstrate how Solana’s high-performance network and low transaction fees support regulated financial products.”
Looking back in history, every generation of giants seems to have made efforts in stablecoins supported by themselves for a period of time. Currently, Solana has risen and has a wide range of stablecoin demands. Although there is still uncertainty as to whether Solana can regain its position as a “giant” in the previous cycle, the potential of this “compliance” narrative alone is enough to create ripples in the stablecoin market structure.
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Tags:
Paxos
Solana
USDP
Centralized Stablecoin