Banks Circle as PayPal Stablecoin PYUSD Hunts Scale

PayPal's PYUSD is a $2.8 billion stablecoin trying to matter in a market where Tether's USDT sits at $184 billion and Circle's USDC at $73 billion. That gap explains why PayPal stablecoin PYUSD is now moving onto Polygon's international digital asset rail while banks prepare a rival shared coin.

PayPal launched PYUSD on Polygon's Open Money Stack, a rail built to move money across borders while handling compliance and access to traditional currency, according to American Banker. The move gives PayPal another distribution channel at the exact moment large banks, card networks, fintechs and payment firms are lining up behind OpenUSD, a stablecoin from Open Standard expected later this year.

This is no longer a crypto-only contest. The fight is over who controls the next settlement layer for digital payments.

Why PayPal stablecoin PYUSD matters now as OpenUSD gathers bank support

The practical promise is simple: stablecoins can move value across borders faster than many traditional payment paths, with fewer handoffs and more programmable settlement. For merchants, freelancers and platforms, that could mean faster payouts, easier treasury movement and cleaner access to crypto wallets without taking direct exposure to volatile tokens.

PayPal already has something banks often lack in crypto: a live consumer and merchant network. American Banker reported that PayPal expanded PYUSD to 70 countries beyond the U.S. earlier this year, which gives the coin more room to support cross-border payments.

Banks have their own advantage. They bring regulatory familiarity, corporate relationships and trust with institutions that may not want to hold a fintech-branded token.

That is the tension. PayPal is trying to turn an existing payment network into stablecoin usage. Banks are trying to make sure stablecoin settlement does not become a market led entirely by crypto-native issuers or fintech platforms.

"Every stablecoin issuer is going to face more pressure as banks, fintechs and other regulated issuers enter the market," James Wester, research director for digital assets and crypto at Javelin Strategy & Research, told American Banker.

What changes when PYUSD launches on Polygon's payment rail?

PYUSD is PayPal's dollar-backed stablecoin, issued by Paxos, designed to track the value of one U.S. dollar. Its purpose is payments, transfers and digital commerce, not speculative price movement.

The Polygon integration matters because it moves PayPal stablecoin PYUSD beyond PayPal's own walls. Companies can accept funds from a card, bank account or exchange balance, move PYUSD across borders and cash out into local currency, according to American Banker.

Polygon says it settles more than $2.5 billion in stablecoin volume each day and has processed more than $2.6 trillion in total stablecoin volume. PayPal gets access to that activity. Polygon gets a recognizable payments brand and a federally regulated dollar token issued by Paxos.

Marc Boiron, CEO of Polygon Labs, framed the appeal bluntly:

"PayPal is a well-known brand, it's GENIUS Act compliant, and the desire for enterprises and businesses to use PYUSD is higher than most stablecoins," Boiron told American Banker. "It gives us another option."

The hard part starts after launch. More rails do not automatically create more usage. Wallets, exchanges, merchants, platforms and regulators all have to trust the token, the redemption path and the businesses handling the on-ramps and off-ramps.

For readers tracking the compliance side of stablecoins, XOOMAR has also covered stablecoin KYC rules facing issuers. The Polygon launch itself is about distribution, but distribution only matters if compliance and redemption hold up under real payment volume.

How OpenUSD could compete with PayPal's PYUSD

OpenUSD is slated to launch later this year from Open Standard, with backing from major banks, fintechs and payment companies. American Banker lists supporters including BNY, Huntington Bank, U.S. Bank, American Express, Visa, Mastercard, Stripe and Coinbase.

The broader supporter list also includes Adyen, Affirm, Klarna, Chime, Google, Brex, Standard Chartered, Nuvei, Ramp, Marqeta, Shopify and Remitly. PayPal and Paxos are not listed as supporters.

That matters because OpenUSD could present itself as shared infrastructure rather than one company's coin. A business that wants tokenized dollars but prefers dealing with banks and payment networks it already knows may find that model easier to justify internally.

Still, a broad coalition is not the same as a working payment network. XOOMAR analysis: American Banker's source material does not spell out OpenUSD's operating model, so the open questions are basic but important. Who manages reserves? Who handles redemption? How are disputes handled? What incentives keep all participants aligned?

The same regulated-finance push is visible outside stablecoins too. XOOMAR has tracked how fintechs are seeking deeper banking roles, including Klarna's U.S. banking license bid. Stablecoins are another version of that same strategic pressure: payments firms want more control over money movement.

A cross-border PYUSD payment in practice

Take a simple case. A U.S. freelancer is paid by a client in Singapore.

With a stablecoin rail, the client or payment platform could convert dollars into PYUSD, send it across a blockchain network, and deliver it to a compatible wallet or platform account. The freelancer could then hold PYUSD, spend it where accepted, or cash out into local currency through a supported provider.

The appeal is not that the user sees blockchain. The appeal is that the settlement layer can work faster behind the scenes.

PayPal's Larry Wade gave Coinage a related internal example. He said PayPal has processed "hundreds of millions of dollars" of internal dividend payments using PYUSD, which previously would have taken days and now can be done instantly.

That shows where stablecoins may first prove themselves: not necessarily at the consumer checkout screen, but in treasury movement, merchant settlement, platform payouts and cross-border flows where timing and intermediaries create friction.

The catch is the same in every stablecoin payment story. The blockchain leg can be fast, but the full payment is only as good as the on-ramp and off-ramp. Users still need reliable banks, exchanges or payment apps to turn tokenized dollars into spendable money.

The risks that could slow PYUSD, OpenUSD and bank stablecoins

Stablecoins need more than branding. They need liquidity, merchant acceptance, developer support, clear redemption, and enough real payment use cases to justify their existence.

Wester put it directly to American Banker:

"The winners will be the coins with distribution, liquidity, developer adoption, merchant acceptance and real payment or settlement use cases."

Users also face practical risks. Wallet security can fail. Scams can spread. Chains can suffer outages. Redemption rights can vary depending on whether a user has direct access through PayPal, Paxos or authorized partners, or must sell through market channels.

Regulation remains another constraint. Aaron Press, research director of Worldwide Payment Strategies at IDC, told American Banker that fragmented regulation is the largest source of uncertainty for these coins. He also said cross-border payments are the most promising use case, but stablecoins need more regulatory clarity and stronger controls before they scale to a meaningful share of volume.

That is the core business risk for PayPal and the banks. If stablecoins do not reduce cost, improve settlement or unlock new payment flows, merchants will not care which logo is on the token.

PayPal's wallet-first model versus banks' shared coin model

The competition is not cleanly bank versus nonbank. It is distribution versus trust, speed versus coordination, and product usage versus institutional comfort.

Wester told American Banker he does not expect "a simple bank-versus-nonbank outcome." That is the right frame. The market could split by use case: retail payments, treasury settlement, remittances, merchant payouts and crypto trading may not all use the same coin.

The signal to watch is not another launch announcement. Watch actual payment volume, merchant acceptance, bank participation, reserve disclosures and whether Polygon turns PYUSD into measurable cross-border usage. If PayPal stablecoin PYUSD becomes invisible infrastructure that moves money faster or cheaper, it has a real case. If users still have to think too hard about the token, OpenUSD and the banks will have an opening.

Disclaimer: This XOOMAR analysis is for informational and educational purposes only. It is not financial, investment, legal, tax, or professional advice. It does not provide buy, sell, hold, price-target, portfolio, or personalized recommendations. Verify information independently and consult qualified professionals before making decisions.

The Bottom Line

• PayPal is trying to make PYUSD useful for real-world cross-border payments, not just crypto trading.
• A bank-backed OpenUSD could challenge fintech-led stablecoins for control of digital payment settlement.
• The large size gap with USDT and USDC shows how much adoption PYUSD still needs to gain relevance.