TL;DR
- PYUSD reaches a $4 billion market capitalization in mid-February.
- The stablecoin’s supply on Arbitrum exceeds $220 million, ranking as the network’s fourth largest.
- Growth on Arbitrum is linked to a partnership with Permian Labs, developer of USDai.
PayPal’s stablecoin, PYUSD, reached a total market capitalization of $4 billion earlier this month. Data shows that a large portion of its recent growth on the Arbitrum network is linked to a financing agreement for artificial intelligence hardware.
According to a report from consulting firm Entropy Advisors, the amount of PYUSD circulating on the Arbitrum blockchain now exceeds $220 million. This positions it as the fourth-largest stablecoin on the network. For context, the three largest stablecoins on Arbitrum are USDC, USDT, and USDAI. Data from the tracking site DefiLlama places the current PYUSD supply on Arbitrum slightly higher, at $256.6 million.
Analysts at Entropy Advisors posted on X on February 16 that the increase in PYUSD supply on Arbitrum correlates with a partnership announced in mid-December. The agreement was made between PayPal and Permian Labs. Permian Labs is the main development team behind USDai, a stablecoin identified as USDAI.
.@PayPal's PYUSD market cap on @arbitrum has crossed $215M, making it the network's 4th-largest stablecoin.
The growth is a direct result of @USDai_Official integrating PYUSD to back its USDai token, alongside @m0's wM, while gradually transitioning to backing the asset with GPU… pic.twitter.com/8wK14CJYFy
— Entropy Advisors (@EntropyAdvisors) February 16, 2026
The terms of the agreement involve adding PYUSD to USDai
Specifically, PYUSD now functions as a reserve asset to back USDAI. It also serves as a tool for settling transactions and providing liquidity for the USDai protocol. This protocol operates primarily on Arbitrum. Its business model involves financing for artificial intelligence infrastructure, which includes items like graphics processing units (GPUs) and data centers.
USDai announced the details in a December post on X. The post stated that loans issued by the protocol can now be made in PYUSD. These loans are then settled directly into PayPal accounts. The announcement noted that borrowers can use a single dollar-based payment method to pay for GPUs, data center costs, rentals, and subscriptions.
To encourage deposits, the agreement includes a one-year incentive program. Under this program, up to $1 billion in PYUSD deposits placed into USDai will earn an annual percentage yield of 4.5 percent.
Data from DefiLlama indicates that since the integration was completed, nearly all of the PYUSD tokens on Arbitrum have been deposited into the USDai protocol. At present, PYUSD makes up more than 43 percent of all tokens deposited in USDai. It is the second-largest asset in the protocol by deposit volume. The largest deposit asset is WrappedM by M0 (WM), which is USDAI’s base asset. WM accounts for more than 56 percent of the total value locked in the protocol.
USDai’s public documentation provides further details on its long-term plan. The documents state that the current incentives are meant to attract initial liquidity, but they are not intended to be the permanent source of returns.
The documentation implies that stablecoins are being used in this early stage mainly to facilitate settlements. The protocol’s stated goal is to eventually shift its focus toward lending backed by GPUs and AI infrastructure as its primary source of yield and collateral.
