Summary
LlamaRisk supports enabling PYUSD as collateral on Aave V3 Core with an LTV of 75%. However, we observe a notable concentration of DEX liquidity, with the majority of PYUSD liquidity in the leading Curve pool bootstrapped within the past 20 days and entirely supplied by Spark through its Spark Liquidity Layer. This allocation may not be sustained once the incentive program concludes. Therefore, we recommend closely monitoring the pool’s liquidity dynamics before considering any further cap adjustments.
Market Risk
As of October 11, 2025, PayPal USD (PYUSD) has a total supply of 1.92B on Ethereum. The majority of this supply is concentrated among two centralized entities, Paxos Hot Wallet, holding 36.74%, and Copper: Ethena Custody, holding 31.42%. This distribution pattern highlights a high degree of custodial control and suggests that PYUSD is primarily being utilized as collateral for the issuance of some other asset.
Liquidity
Source: pyUSD/USDC Swap Liquidity, DeFiLlama, October 11, 2025
Users can swap up to approximately $105 M worth of PYUSD for USDC within a 7.5% price impact. This capacity has increased notably following the rise in DEX liquidity after the launch of PayPal’s incentive program. Most of PYUSD’s liquidity is concentrated in its top two pools: Curve pyUSD/USDS ($98.7 M) and Curve pyUSD/USDC ($30.93 M).
Source: pyUSD DEX Pairs on Ethereum, GeckoTerminal, October 11, 2025
The DEX liquidity for PYUSD is highly concentrated across these pools, particularly in the Spark PYUSD Reserve on Curve. The breakdown is as follows:
- Curve pyUSD/USDS ($98.7M TVL): A recently launched pool on Curve that is part of the Spark Liquidity Layer (SLL). Its entire liquidity has been bootstrapped over the past 20 days and is exclusively supplied by Spark.fi’s ALM Proxy. Since this pool accounts for the majority of PYUSD’s DEX liquidity, it remains uncertain whether the SLL allocation will persist once the PayPal incentives end. It is therefore advisable to closely monitor liquidity levels in this pool and avoid further cap increases if liquidity declines.
- Curve pyUSD/USDC ($30.93M TVL): 32.3% of this pool’s liquidity is supplied by a single EOA.
Disclaimer
This review was independently prepared by LlamaRisk, a DeFi risk service provider funded in part by the Aave DAO. LlamaRisk is not directly affiliated with the protocol(s) reviewed in this assessment and did not receive any compensation from the protocol(s) or their affiliated entities for this work.
The information provided should not be construed as legal, financial, tax, or professional advice.
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