Paxos marries Solana ecosystem, USDP is ready for spring?

Perhaps this is the beginning of the Nth stablecoin war.

Written by: Loopy, Odaily Planet Daily

Recently, a regulatory development of Paxos attracted our attention. Paxos received approval from the New York Department of Financial Services (NYDFS) to expand its stablecoin issuance operations to the Solana blockchain. It needs to be emphasized that even large-scale projects such as BUSD were still only allowed to be issued on the Ethereum network by regulatory authorities.

The move marks the first time Paxos has expanded its operations beyond Ethereum into the crypto world.

Paxos was once known for its BUSD business. In February 2023, BUSD suddenly came under NYDFS supervision. After BUSD was suspended by regulation, Paxos gradually became weak in the competitive landscape of stable coins. Will the approval of Solana’s business bring new growth points to Paxos, and even disrupt the relatively stable stablecoin market?

Paxos’s market share shrinks, and its halo as a challenger fades

When we observe time on a cycle-travel scale, we can discover the dramatic development process of Paxos.

Historical data shows that during the bear market in 2022, the market values of USDT and USDC were slowly declining. However, BUSD owned by Paxos has continued to rise slowly, once reaching a historical high of over 23 billion US dollars.

After regulatory sanctions, Paxos lost BUSD. USDP has never been able to make too many waves in the stablecoin market.

DeFiLlama data shows that the current stablecoin market is still dominated by two companies. Although BUSD once ranked as the third largest stablecoin, the market share of USDP, the main product of Paxos, is still at a low level.

According to data from DeFiLlama, the total market value of stablecoins is approximately US$130.7 billion. USDT and USDC together account for 88% of the stablecoin market share.

Although USDP is the ninth largest stablecoin, in terms of share, it is far from being able to compete with the long-standing duo in the stablecoin market.

Currently, the total market value of USDP is only US$370 million. If compared with the peak value of BUSD, it is only equivalent to 1.6% of BUSD.

This data seems a little ugly for the former third in the market. This announcement of expanding its business to the Solana ecosystem may bring new vitality to Paxos.

Solana’s stablecoin use cases are growing, can it take Paxos away?

In recent days, the SOL token has continued to surge, bringing the Solana ecosystem back to the center of the market again. DeFiLlama data shows that Solana ecological TVL has increased nearly five times since this year.

With the rapid development of Solana, although we do not yet know where Solana will go in the future, the community and the market have high hopes for it.

Solana seems to still be using compliance as one of its underlying narratives going forward.

Currently, SOL has become the fourth largest cryptocurrency by market capitalization. If USDT is not included in the ranking, SOL is the third largest cryptocurrency after BTC and ETH. In the future, if Solana once again grows into a new generation of crypto giants, stablecoins will still be an indispensable business landscape and use case in this ecosystem.

Currently, there are still many regulatory uncertainties in the stablecoin market. Although USDT and USDC operate stably in the long term, USDP still has unique features in terms of compliance.

What is even more noteworthy is that although BUSD once gained a good market share in the encryption market. However, BUSD, which is more well-known to the public and deployed on BNB Chain, and ETH mainnet BUSD, which has obtained regulatory permission, are not the same thing. BUSD is only deployed on the Ethereum network by Paxos, and other networks are cross-chained by third parties. Previously, Odaily Planet Daily had a detailed explanation of Paxos and BUSD in an old article.

As investors, it is difficult for us to say which stablecoin brand is more secure and reliable, but judging only from “paper data”, USDP is undoubtedly one of the leading stablecoin brands with more complete compliance.

Paxos or regulatory permission will expand its business territory beyond the ETH main network for the first time. This is not only an outlook on the potential of USDP, but also explains the regulatory attitude towards Solana to a certain extent. A more reasonable guess is that if Solana still retains its “compliance”, I am afraid that the “compliant stablecoin” will be an insurmountable puzzle piece in the ecological landscape.

How active are Solana’s stablecoin use cases?

This expansion of Paxos’ business is seen as a milestone step for the company. Looking to the future, perhaps this move will trigger the next stablecoin war and may also have a profound impact on the entire stablecoin market.

Currently, Solana’s stablecoin market is quite active.

According to institutional crypto data platform Artemis, Solana’s daily stablecoin transfer volume has increased by 600% since the beginning of December to $16.6 billion, and it is now one of the major blockchain networks for stablecoin use cases.

Solana network stablecoin transfer volume

Comparison of stablecoin transfers across different networks

Judging from the level of activity, Solana is undoubtedly one of the most important stablecoin usage scenarios. With the compliance process of USDP, is Solana willing to regard it as an ecological stablecoin that is “strongly bound” to itself?

Paxos has always been known for its “compliance” and issued the PayPal stablecoin PYUSD. Solana co-founder Raj Gokal publicly stated about Paxos’ business expansion: “Paxos’ decision to introduce stablecoin issuance to the Solana blockchain will demonstrate how Solana’s high-performance network and low transaction fees can support regulated financial products. "

Looking back at history, each generation of giants seems to have worked hard on “strongly bound” stablecoins supported by themselves for a period of time. Currently, Solana has emerged, and there happens to be widespread demand for stablecoins. Although there is still uncertainty about whether Solana can recover to the huge ecosystem that was called a “giant” in the previous cycle, the potential of this “compliance” narrative is enough to create a ripple in the market structure of stablecoins. .