PayPal finds a new use for its stablecoin as it looks for ways to fend off Apple

It was a clever trick to give a little boost to PYUSD, whose launch was hailed as an important new bridge between crypto and mainstream finance, but whose adoption has been underwhelming. As of this week, PYUSD’s market cap is only $300 million, which is ninth among all stablecoins and less than 1% of category leaders USDC and Tether. Part of the problem may be a chicken-and-egg thing as PayPal must show a critical mass of people using PYUSD to get others to follow suit—and so using its own venture investments seems shrewd.

If all goes well and PYUSD catches on more broadly, PayPal will have a new source of growth at a time when it badly needs one. Shareholders are fed up with the company as its stock trades around $61, down over 80% from a pandemic-induced sugar high that saw PYPL reach a record $308.

PayPal’s first-year CEO, Alex Chriss, didn’t help his cause when he went on CNBC earlier this month to say the firm would roll out product updates that would “shock the world”—remarks that caused shares to climb 5% in anticipation, but then fall by more than that amount after analysts concluded they were more bored than shocked by the announcements. There’s a reason the adage goes “underpromise and over deliver” and not the other way round.

That said, Chriss does not have an easy hand to play since product tweaks are unlikely to do anything to help PayPal with its biggest problem: Apple. The iPhone maker’s Apple Pay service is gobbling market share when it comes to e-commerce and retail transactions, and a good part of that is coming at the expense of PayPal. Short of PayPal launching a hardware device to compete with iPhone, which won’t happen for obvious reasons, it’s hard to see how the company fights back. Meanwhile, PayPal also has strained relations with another tech giant, Amazon, which booted its Venmo service in December.

Given all this, PayPal’s best bet to become a growth story once again is by winning the next era of payments technology. That era is likely to feature plenty of AI—which featured prominently in the company’s recent announcements—as well as stablecoins. PayPal is on the right track in both these areas, but it will also need plenty of luck if it’s going to hold its ground for the long term.

Jeff John Roberts
jeff.roberts@fortune.com
@jeffjohnroberts

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