PayPal’s PYUSD is increasingly becoming embedded in DeFi, with Morpho Blue, a decentralized lending protocol, announcing a new vault supporting the stablecoin.

On Feb. 14, Morpho announced the launch of a PYUSD vault curated by Steakhouse Financial — a DAO-focused financial advisory firm providing services to top web3 projects including MakerDAO and Lido.

Liquidity providers can earn interest on PYUSD lent out to borrowers. The vault exclusively supports Lido’s wstETH liquid staking token and Backed’s tokenized U.S. Treasury Bills as collateral assets.

Morpho said it is the first landing platform to launch support for PYUSD. The Aave community voted to support PYUSD to its money market protocol with 99.99% support in early January but is yet to onboard the token.

“This move further underscores PayPal's commitment to fostering a vibrant and inclusive DeFi ecosystem,” an announcement said. “This integration significantly strengthens the utility of PYUSD within the DeFi landscape, which has already become one of the top 10 stablecoins since its launch only a few months ago.”

DeFi drives growth for PYUSD

Paxos, PYUSD’s issuer, is seeking to drive up the stablecoin’s adoption through DeFi integrations. The company enlisted Trident Digital to promote the stablecoin as a vehicle for DeFi yields, with Trident authoring the original Aave proposal and pushing integrations on Curve Finance.

PYUSD was launched in August but initially struggled from sluggish adoption, with daily volume sitting below $10,000 and just 10 wallets holding more than $3,000 PYUSD three weeks after its mainnet deployment.

PYUSD’s growth picked up significantly in December following the deployment of two Curve Finance pools for the stablecoin in December. Five PYUSD pools are now live on Curve, with FRAX/PYUSD ranking as the fourth-largest pool on the protocol with a TVL of $128.3, although Frax reportedly controls the majority of its liquidity.

PYUSD’s market cap doubled to $300M since the start of December, while daily volume is up more than 600% at $22M over the same period, according to CoinGecko. PYUSD is the 10th largest stablecoin and ranks eighth by volume.